front of my office. either way, i get a lot from it and i've made some promises to them. that is we need to get down to some of the numbers with refunding. i know we've talked about that a lot today. but i want to be perfectly clear on this so there can be no question. some of these postal and employees are giving some information through the grapevine are some outside organizations. correct me if i'm wrong. if we were to do away with all of the refunding completely, the postal service would still be losing money to the it is that correct? >> that's correct. if we were to go to as some of my colleagues on the other side of the ogle suggested, the more actuarial basis with the senate we would save about two to $3 billion over with the pre-funding requirement is today; is that correct? we are not pre-funding for

people that haven't been born yet they are looking at a rational to pay the workers the benefits that they've been promised. if we don't put money away it is going to be up to the whim of congress as to whether or not there is money to pay them if they do not accrue for it would that be a fair statement? >> that is absolutely correct. >> would you agree that those are accurate statements as well? >> mr. chairman, i agree. >> let's talk a little bit about saturday. i asked you which all of you chose to break and if the pre-funding payments or the saturday delivery. my question on that is as a business person if i had the opportunity to go to court to save several billion dollars if it is a qestionable issue it might be favorable to go ahead i think i might have gone ahead with it.

he pointed out in your testimony there was a concern about the money in the private sector had to adopt their mechanisms and the light. didn't you already put a similar burden on the private sector when you said we are going to stop the saturday delivery for all of the packages and priority mail? did they spend the money and at least start to make those plans and adaptations? >> mr. chairman i don't have any knowledge of what they started, but there is no disagreement the board has been unanimous now for overhree years, that it's going to be necessary to go from six days to five days. it will happen. i can't tell you when, that it will happen. >> i want to give one more thing to my commitment to my postal workers to get to the bottom of this. an actuarially based prepayment of retirement and health care benefits is consistent with what

is required by the federal law of ups, federal express and every other almost every other corporation in the country it would be very similar. >> it could be different from what the private sector companies are doing. i would like to know, i would like to make that available to the postal employees that i represent throughout the country. >> you are correct but it's not the same for health care benefits. i will provide a more detailed record. >> you are saying the postal service now is operating at 140% of current revenue; is that the number you gave? >> drm laes, unfunded

liabilities. >> bankruptcy would probably be where they are. >> finally let me go to something completely unrelated. you testified he wanted more flexibility in their rates in respect to packaging the monopoly on first-class they would have it facto monopoly on the third clause catalogs and what people would refer to as door hangers and nobody has the reach you do. how do you give that flexibility without giving you the power to do sweetheart deals and take the winners and losers based on political based on volume or objective standards you come up with something that there is a case with respect the company

that competes with newspapers and talk about offering them a sweetheart deal it has a quote governmental agency still make sure you treat everybody fairly and objective fashion. it's been a guiding one way of doing it is to allow the board of governors of the postal service to implement immediately with the notice but relatively short notice these rates and these changes subject to the public postal regular for the commission did have the authority to say no date on fairly calculated the numbers by improperly allocating with the monopoly status is opposed to the competitive side of the house. i don't think it should be completely unfettered. although i think he would find the board of governors equally of to the task of balancing all of the aspect you just described

as you what the postal regulatory commission. >> mr. chairman, perhaps the chairman would make sure on the pension questions which i'm sure you covered very early, the question of if a private sector pension did not fully accrue and have all the money in for an example united airlines when they went bankrupt what would occur verses what would occur in the case of the post office i think that he is pretty well qualified to contrast. >> i am about out of time that i think that question -- i will obviously give somebody on your side. we will get that question for police somebody will yield on my side. we will do it within the constraints of the time so we will go to mr. part right now for five minutes.

>> would the gentleman yield? >> i want to go back to the question was asked in fairness. with regard to what the chairman just said, can you answer that? >> the pension benefit corporation would step in and have to take over that situation, and in that case, they have a certain minimum amount that they pay that may or may not be anywhere close to what they were promised under the programs to be the pension benefit guaranty corporation would take over as they have for other plans where companies have failed the private sector. in the health area i don't think that there is any comparable situation.

i will go back and think about that and if i have a different answer i will provide it for the record but i don't believe there is. it is jotting down the peace. what do we have. >> basically the participants lose. the benefits will be cut. >> but your recommendation with regard to the health benefits is what? >> diprete funding take place in a fiscally responsible manner. this protect the postal service employees as well as the institutions and it helps preserve their benefits that it be done on an actuarial basis consistent with the legislation was passed and that the goal would be set for 100% funding over time. those are our recommendations. >> you would feel comfortable that they would be sufficiently taken care of no matter what. >> yes. if that happens you need a

comprehensive legislation to make the pri's funding arrangements that is where the flexibility comes in and other issues but assuming they have the financial ability to make those repayments coming yes, i'd think that is in the best interest of the employees and the postal service. >> you talk about making sure they have the opportunity to raise their rates. is that right? >> they need flexibility both pricing 80% of their costs and personnel costs you're not going to eliminate your costs unless you do your delivery standard and when you have the volume dropping the way it's dropping and projected you needed to have the flexibility leads to change delivery methods. five day delivery is something that we should be considering that they need pricing options and flexibility.

the main competition is the introduction of the new technologies. they are occurring very rapidly, changing how people are communicating. if they don't have the flexibility to make those changes, they are not going to be able to be competitive in the future. the postal commission could stay in place as a check against what they are doing. but unless they are given the flexibility i just don't see how they are going to deal to give their costs and alignment with evidence today that the postmaster general or to raise the rates, that wouldn't interfere with future businesses with a certain degree to lose business i'm assuming that you have taken all of that into consideration. is that right? >> you need the balance raising their rates. many of our suggestions go to cutting the cost. our point is that you need to

bring costs and alignment with the revenues. so why not saying that you should be raising rates. you have to cut the cost first and dues great ability particularly for products where you are losing, not covered in your cost already as i mentioned in the articles and catalogs. but you have to balance those issues appropriately. >> on the downsizing there's been substantial downsizing already. and i take it that when you talk about downsizing i think you mentioned that there should be some type of incense. why did you come to that recommendation what is the basis of that? >> if you look at the decline of the mail volume there is excess capacity in the system. they are already trying to consolidate the mail processing

centers you look at the decline. mr. barnett mentioned they went from to under 13 million pieces of mail to 160 and they are expected to go further. and over a relatively short period of time. so you have access processing capabilities and then also in the retail operations as well they are already cutting back the number of hours as we mentioned some places to two hours a day that's the current volume as it drops further, the excess capacity will build and then you have to downsize because you don't have the revenue to support that network. >> thank you very much mr. chairman. patiently waiting, the gentleman from michigan. you are recognized. >> can you hear me all right? >> mr. chairman barnett, i have

a few questions i want to recap and make sure understand this correctly but i want you to know that i have a bond affection for the office as a soldier overseas to be the highlight of my day and a big booster to get mail from home. and i think i carried that over. i always look forward to looking in my mailbox that there are a few things that are clear. some days there is no mail at all and other days there may be one or two big contrasts ten years ago, 15 years ago before the internet via always look forward to it and always look forward to my postal delivery person to say hello to them. there are a few facts indicating those. you have first-class mail and a monopoly increasing locations to deliver the mail you are required to do so. increasing the marketing share

delivery. you are required to compete with other commercial businesses in that area. >> you have to compete on something that well, there's other competitors. for cost-cutting you are consolidating some sorting locations or mail processing plants. you also are looking at cutting the delivery down to five days versus six. have you ever done any testing anywhere in the country, any region where you've done that and said okay, folks in this particular area we are going to deliver five days. make sure your cost savings and customer satisfaction or whenever, some kind of a valuation. have you done tests like that? >> i'm not aware of the tests

accept the presentations made to the board show the delivery overtime has been all over the place. in new york city i was told that they delivered five times a day as late as in the 20th century they delivered twice a day to many areas of the country. there are areas now that don't receive mail delivery six days a week. the proverbial bottom of the cannon, that kind of thing. so it's always been some flexibility. but, mr. chairman, you hit the nail on the head if you aren't getting any mail and there is no volume, we have no choice but eventually cut back the delivery time to read >> but you may have to deliver to my neighbor on that same day. you still have to be there, correct? >> today, mr. chairman, that is our problem. the costs of going whether you buy that mailbox or not, the cost is still there.

in fact, there are enough people using one of our innovative ideas was every door direct which has been a real success. you can go in small local businessmen in a town and you can get paid to go to every door within the sid code for a much lower price. it's not large money yet but it's certainly an innovative idea that worked. >> excluding medicine deliveries, pharmaceuticals, possibly a few other things is it possible or have you ever looked at delivering for instance using one carrier to deliver to one routt monday, wednesday and friday and routt number two for instance the same delivery person on tuesday, thursday and saturday? so you get a six day delivery? >> i think that postal management is considering every option that available.

obviously there are logistics and legal issues surrounding universal service, the union agreements, the union contract most would have to be renegotiated to accommodate some of that but i'm not sure the cost savings would be sufficient to testify at. but they are looking at every option that is available out there. >> are there any test results? >> i don't know any test results the board has asked and management has provided extensive polls showing high numbers in the 70% range of the public is in favor of reducing deliveries from six days to five days and it's been very favorable to the closing as a matter of fact most of the

governors' report i don't get enough mail anymore than i care on saturday delivery to the additional you should know all of the post offices are open on saturday and any businesses or individuals that need saturday delivery can get a saturday post box it will be available at post boxes so this would only primarily be those that didn't have the need and don't give a post office box. it's not a perfect scenario and you can come up with people that will be inconvenienced. but we are billions and whole and somebody somewhere has to be inconvenienced and it >> i get the impression from the surveys and all of the data plus just looking at the mailbox. we are under dire circumstances. looking at more drastic measures might be worthwhile to look at

and for that i will yield back my time. >> we recognize the gentle lady from new york. >> thank you for your public service and really mengin identified with my colleague on the other side of the ogle, the highlight of his day is getting the mail. that is certainly true in the military and with many of us. and they do a terrific job getting mail to all across the country. it's become a dangerous job with ricin going in the mail to a united states senator. of course it went through the mail service and workers were exposed to it. i know that in new york many workers were exposed to amtrak's to do so with the new terrorism that unfortunately is with us, they are really in the line of fire in many ways.

postal services are very appreciative by the communities and nothing gets them more excited than a consolidation or a notice to close. and i have to notices in the district line honored to represent. one of them in the area is in a beautiful building owned by the post office and they are proposing to sell the building and then go to a place they are going to lease, and they are proposing to do this before they find the place they least and i respectfully request and believe you should know where you are going before you sell a post office because in the urban area it is cheaper to stay in the building that you alone than to lease so i think we should know where we are going before we close the post office and have some type of a cost-benefit analysis. also, do you look at other

creative ways in the post office? some are very large and beautiful you could possibly rent some space to an attorney or someone that could help with the goal. my question is why in the world are you selling post offices before you even know where you are going to lease? if you do that in my district you will pay more money leasing than owning your post office society to the >> mr. barnett. >> representative, in every case like that a cost-benefit analysis is done by the real estate division and postal service. the specific question is probably addressed to the postmaster general on the next panel. but the board of governors would agree in general with your statements we wouldn't wish to do it that would cost more money. >> i believe it is a mistake to do anything. before you know where you are going. you are making a commitment in the community that it is a post

office that makes money. and again, if our goal is to make money, i don't understand why you would consolidate close, sell or do anything with a center that is literally making money can you explain that to me? >> mr. chairman, representative, again, whether it will be a written and fully available cost-benefit analysis to any real estate transactions were going to occur if not hundreds of thousands of those are around the country today as we go through. >> but we're in the process is it done? it is being considered not after the fact. if there is any such analysis now, i don't have it and i've asked for. if there is a law that says you have to have the cost-benefit analysis before the decision was made i think it should be. that is just good government and

good business. i can't imagine a business selling their business to leave something without first knowing where they are going to go and how much it is going to cost and i am not kidding you in new york it could be very expensive considerably to lease. i live in new york in an urban area to own your own building. but i would say that is upstate new york, too hitting it so i would like a clarification for the committee on what exactly is the procedure. and if you are doing this cost-benefit analysis, where do you get that? where do you get the cost benefit analysis? >> we are aware they have a process. we haven't looked at it for awhile but i can provide some additional information for the record. >> i would appreciate that. now is there a law or a procedure that if it is in fact making money, you don't close at

there are efforts to close other post offices in my district, and i showed that they were making more money than any other place in the state so why are you trying to close them? you touched on it. we are in a very competitive process right now and if you close something people have other options not only the internet but they can go to private providers and if you think they are going to walk blocks away to someplace else they are not going to do it. you are going to lose those customers. it doesn't look to me like a good business plan. anyway, i am very concerned about it. i would also like to know heuvel all on the community outreach. my community is reaching out to me today i want to know or you required to have a community meeting so the community can be heard or is that a discretionary decision?

how is that handled? i must say the post office has been very responsive to the requests and i would like to know what is in the official procedure? >> the time is expired about the lady may answer briefly. >> the service does have procedures in place and there or community meetings in every case and it's all set out with the public regulatory post of regulatory commission procedures and usps procedures. >> my time is expired. >> thank you mr. chairman. the postal wall of the united states in august 2011 with a page 21 im 4011 with other government agencies as to subletting but if the gentlelady would like it, we can arrange a bipartisan briefing on a number of the issues she brought up here today. we go to mr. duncan.

>> i've been given the figures now 471,000 postal retirees and 522,000 current employees those numbers roughly bankrupt. >> mr. chairman, representative, those are fairly correct. what i am really wondering about, assuming were guessing you are paying the health benefits not only for them but their families as well, is that correct? do we know how many people in total that you are paying health benefits for at this time? >> mr. chairman, representative, i don't. the postmaster general will be up shortly to get i'm sorry. at the board level we don't get into quite that detail. >> have you changed or reduced the retirement and health

benefits for the newly hired employees. one of the things we of the comprehensive reform will do is to verify some of that. there are only changes in the collective bargaining agreements and there are some modifications for the new hires. there are basically still paying the retirement and health benefits. i guess what i'm getting at is it is less than 20% in fact i think it is 16% of the employees in the private sector have retirement plans with their companies, and also i was given the figures that the hourly pay for the postal employees fo an hour to $29 an hour.

almost every place in the country, those are really good salaries. we all want to give people as much as we can possibly give them, but do you think the postal service would have trouble getting employees if they told 25 for $35 an hour that you were not going to get any pension or health benefit since those seem to be the big expense is here. recently we had some jobs available at $15 per hour and there were 90,000 applicants. >> all i am saying is that we certainly wouldn't have any trouble getting employees and i

think probabl99%f the country paying those kind of wages, 24 or $25 an hour even if you told the employees that unfortunately we can't continue to pay the retirement and the health benefits that we've always paid. and on top of that i think that the retired postal employees should be the ones that are demanding the most fiscal conservatism in the future. we are going to have trouble paying the benefits that have been promised it seems to me. and i see you shaking your head up and down mr. barnett. >> representative, we discussed these at length and that's why i said earlier the comprehensive reform will look at the possibility of going to the defined contributions in the future allowing us to run our own health plan. we would like to run it more like a business which would ultimately be the benefit of the consumers. just so i have i straight, i

saw where you rea t tatf1on. >> mr. chair, that is correct. >> and you be faulted on the 11 billion prepayment. >> that's correct, mr. chairman. >> so it is worse than the 15 billion. and then the postmaster in his testimony says you are losing 25 million a day which makes a little over 9 billion a year. so it seems like it is almost worse than what we have been talking about at the past. >> mr. chairman, very respectfully i can tell you we have a five-year plan which we adopted years ago with modifications to meet we can operate in the black, about 100% of the reason we cannot operate in the black today is because we

cannot get the postal reform through the congress. >> thank you very much. >> if i could ask unanimous consent just to follow up for ten seconds, you were asked about lwer wages. based on your assessment, if we put in all of the efficiency changes and we optimized the current volume how we deliver what we deliver and where we deliver it, can we break even and still pay the good wages and benefits that we currently pay to our employees. it would be very difficult to read the answer is almost close, that sort of thing. i'm not sure it would break even that you can come pretty close. the flexibility and the work force rules come all of those things that defined contribution to the health plans to the whole structure to the >> but my intelligence is from

the members should expire. as we go to the gentle lady from new mexico i do want to let everyone know that in the last congress, and intended in this congress is to have substantially the same wages and benefits for going forward as we do. our reforms were intended to win and i believe on a bipartisan basis we are going to try to keep e wages andbenefi close to what they are for the purpose of making sure that what we are looking for is efficiency to break even and not necessarily wage reductions.

figuring out, where some things will be more expensive than they might be in the private sector it is because we are delivering a public service. in a state like new mexico we are rral androntier, inuding in my district that is the mst urban district, since 2011, with 27,000 people, out of the workforce for the postal service and work hours reduced by 40 million hours, across the country, the number one complaints i get in my office are long lines,

having to travel long distances it find a post office, and i'm very concerned states like the new mexico as we trying to figure out that the fixed cost here is personnel. that means that we don't have an effective public service, so specifically more than just you need reforms and flexibility. what is the process for making sure you have a high quality, very dependable and an infrastructure that is going to benefit and protect states like new mexico that have rural and frontier issues that are critical to having an open post office? >> the, a lot of answers to that, mr. chairman, representative, but the concept of the village post office is most effective in the rural areas. the concept of a villag post office is we would put post offices in grocery stores, targets, wal-marts, any place that might be like

that, home depots, office depot, things like that. because, they're open more hours than typical post offices so you have more coverage. it is done at a lower cost typically, and most people don't need all of the services of a post office. they only need a stripped down version of the post offices. additionally, we are, we need to be more innovative that you can do most of your things across the internet today. if you need stamps, all you need to do order them, they will be delivered to your house in couple days or your business. you don't need go to the post office to get stamps. we need more of that. our flat rate shipping boxes have been a real boon to that. a box costs 5.65 or 5.95 or for the bigger box as little more. you don't need to go to the post office. you get it and put your

things in it. you can order postage online the we're doing more to get the village post offices. >> i live love the village could be september that you fear you will get relationship between those folks, particularly older folks who are not use you internet to a same degree. we have a huge growth rate in that population. also in rural and frontier states you don't have internet coverage. i think about people in areas that will not be a possibility and more rural you are the less opportunity you have for the kinds of home depots and wal-marts or big box stores don't exist because they don't have the population centers to support them. and in many areas of course, as you know in our state we don't even have grocery stores. we might have a convenience store and there are issues i have about consumer protection in that environment. while i appreciate, it is a

concept that could work, we need strategies that are going to take into consideration varying factors and that the goal here, and in addition to being able to be in the black, is that, you have a public service and we have to serve these con at this time cents. i would really encourage you with your leadership on the board of governors to really think about ways that are going to be unique, more than just flexibility to get there. that you're looking at quality, connectivity, those relationships, the rural fabric in these states, related to the post office. when i was in inaing the postal service was a very effective partner in receiving those constituents, thank you. i yield back. >> thank you. and recognize the gentleman from mr. georgia. >> thank you, mr. chairman. just in listening and writing down notes, we went all over the map from the importance of postal service. i don't think anybody will detract from that. we talked before.

you been in committees before. i serve and the postal service subcommittee. what concerns me about this is some of the things that are said. really as we go forward and next panel, we talk about department of defense, we talk about the post office and prepayments being made. there is one truism on both, o s the taxpayer is ultimately on the hook. yes. so it is not an issue is this just a quasi-government organization, both dod and you need prepayments. we're ultimately on the hook the taxpayer is. what concerns me in a time, admitted, mr. chairman your low liquidity. you're not really sure you can get down as low as two days later this year, at a time in which the discussions have been made and i have read about the board of governors and your role. you do believe you have a fiduciary duty in your role to the postal service and in your role, correct? >> mr. chairman, representative, yes. >> that means there's a

trust. there's a trust with you and the board of governors not just strictly you but i believe with the postmaster general and others in this situation. what i keep hearing is, well we thought of and we're looking at that. we have a five-year plan that was many years ago. we have discussions that we want to do. we're exploring ideas. these are direct quotes from today, exploring high ideas that do pot have high likelihood being implemented. one we keep talking about dealing with your health benefit plan the now we all, get it out in the open here. to that without his time dividedention governme is not going to happen you will not be able to break these collective bar gaining agreements and health agreements to get that to happen. we're focusing on things that don't matter because in the big picture they may sound great. they may help you get to flexibility. they may help you but we're just throwing out of the can we cut to the chase here? are we waiting on congress to do this for y'all. >> mr. chairman,

representative, we are waiting on comprehensive postal reform because we can not do any of these things unilaterally. >> we can't go from six to five days. >> what can you do? >> we are redoing. we dropped workforce 200,000 employees four years that is significant reduction. >> clues me one moment. reclaim my time. we're entering in agreement in postal hearing the other day basically lost money type of agreements, sweetheart agreements. we're still doing things that again from a picture of, what really strikes me here we're reshuffling the deck on the titanic and you're sinking! we're saying, eventually well congress you have to let us do these things. i believe there are other things we're not doing. in the sense it is saying doesn't matter how great the employees are wonderful people. i have greatest respect and admiration but you're in a environment where they're being put a, as pawns,

probably a good way to put it in a situation we continually talk about what we could do, and if the congress would just step or congress would just do this. there are things that have been reported from. gao that can be done. that we're not doing. my only question is, why? are we depending on legal opinions? are we depending on other things that we can't do these things? is there a political aspect? i'm sitting there asking, you know, if only had been congress, and there has been discussion about and i know there is discussion about there just turning it all back over and putting it back under the government and not being -- that is just, not a viable answer. at this point. the people are not going to take another bailout of the postal service. it seems to me that instead of making decisions in which you can, there have been things, i don't want a listing, there are things light -- right now that could be doing that have been reported out we're not doing. the american people just ask

one simple question, why not? >> mr. chairman, representative, respectfully aregm. we're consolidating plant. >> you implemented every report on the gao things you do everybody you can do. >> mr. chairman, representative, respectfully yes. >> six to five day has to come back to us you can't touch that because after legal opinion. >> mr. chairman, not just because of the legal opinion, congress voted three weeks ago to say no. also the chairman of that committee basically stated as well that was not the opinion in passing? it is in the record? of the rider coming out. >> mr. chairman, i'm unaware of any legal opinion by anybody -- >> not a legal opinion. i think the biggest point here i will be working with you on this, woulding further as we go forward on this, to simply say, find something that can be do an. find something that can be done. if you want to blame congress, that is the easy thing to do, we'll get, it will be happening we'll have to do that and we'll move

forward on it. the postal service is valued organization. constitutionally mandated we need to fix and get it back to serve the way we need to serve. thank you. >> thank you, gentleman. yield to the gentleman from missouri, mr. clay. >> mr. chairman, i'm going to forego my time and ask unanimous consent if i can have 10 minutes on the second panel i will yield to him? >> ten minutes. i don't have the authority do that. >> well i tried. [laughter] >> don want any mistake here. i want t full committee chairman. but i don't have that leeway. i think that would be taken into consideration. as really i guess some of it is up to the minority to give them double-time later. what do you say? >> come on. go for it. >> is gentleman yielding his time? i want to make sure i understand what is going on here? >> if he yields his time he doesn't get double.

>> i asked for unanimous consent on the second panel. it is up to you and he gets nothing. >> then i won't yield. >> all right. without objection he will have 10 minutes on the second. i didn't say in what order. i guess we've, have all members been -- have all members had their five minutes? want to be fair to all of the members. well, we, we are going to go for a second round. >> no, we're not. >> we're not. was the decision made. look at the sigh relief there. but, i thank both of you for coming today and for being, available as witnesses and both of you for your job in trying to help us find a resolution to important service that the government provides to u.s. postal service. so with that i will excuse the witnesses and we'll call the next panel and, the

chairman will, as we change the chairman will recognize them and swear them in >> we will hear the panel from postmaster donahue in just a bit and hear from him live at 1:00 eastern. on the screen pictures of the joke car and tamerlan tsarnaev the region from the chechnya. the 26-year-old is known as suspect number one on the right of your screen, shot overnight and killed in a shootout with police. his younger brother, 19-year-old. dzhokhar tsarnaev is still on the loose. the boston area is in lockdown. police just held a short briefing saying there will be a controlled explosion in the cambridge year in a suspected house. they say they're going door-to-door in boston but the suspect is still on the loose. we'll keep you updated on the c-span networks as event and briefings warrant.

as we mentioned coming up in about 15 minutes we're going to take you live to the national prelub to h postmaster genal patrick donahue. proposed changes to sattallyly. criticize congress for blocking an attempt to stop deliveries. national association of letter carriers also testified to show you opening statements from the hearing postmaster general donahue live from the national press club. >> thank you, mr. chairman, ranking members cummings. thank you, mr. chairman for calling this hearing. postal service is currently with a broken business model. the since the economic recession in 2008. we have an bp experiencing significant imbalance and revenues between costs. this imbalance will only get

worse, in the coming decade. unless laws that govern the postal service are changed. in the past two years the postal service recorded $21 billion in losses including a default of $11.1 billion in payments to the united states treasury. the postal service is exhausted, its borrowing authority and continues to coen with daerously low liquidity. we are losing $25 million a day and we are on unsustainable path. primarily, due to the rise on line bill payments, use of first class mail dropped 28% since the year 2007. which roughly equates to $8 billion. annual revenue we would otherwise have had today.

our financial problems that we have problems fully responding to consumer behavior. any private sector company could quickly adapt to market changes that we've experienced and remain profitable. however, we do not have the all the flexibility we need to grow revenue, reduce costs, and adapt in a changing marketplace. there are areas that we can act within the law and we have been very aggressive in these areas. since 2006, we have reduced size of our workforce by nearly 200 current employees. that is 28% without any layoffs. we've done it in a very carefulanr. mail processing facilities. we're in the process of modifying hours, in more than 13 to you -- 13,000 post office.

changed 21,000 delivery routes. we reduced our annual cost base by $15 billion annually. this year's cost is 75 billion. it would have been 89 billion had we not taken these actions. we've examined and acted on every reasonable and responsible action to match volume along with cost reductions. no other organization, public or private, that i am aware of can claim a similar cost reduction while continuing to function at a high level. and yet, we have to go much farther, much faster and we are prepared to do so. in february of this year the postal service announced it would introduced a new national delivery schedule, designed to reduce our cost by approximately $2 billion annually. we did so after receiving advice from our legal counsel. we did so because the continuing resolution in existence at that time did not prevent us from taking this fiscally responsive action. the lawet e ma

we urged coness not to act to block our new delivery schedule. it enacted next continuing to fu the government for next fiscal year. however, according to our legal opinions, house resolution 93 to fund government operations for the remainder of the fiscal year included language specifically designed to prevent the postal service from changing its delivery schedule according to the law. we are now required to deliver mail as if it were the year 1983. the postal service is, a law-abiding arm of the federal government. congress passed the law. we reviewed it. we complied with it and informed customers which we did last week. our customers require certainty especially as something as fundamental as our delivery schedule. and so, we announced that we would delay implementation of our new schedule until we gained legislation giving us the ability to move forward,

mr. chairman, we need the flexibility under the law to implement our new delivery schedule. we need the ability to develop, and price products quickly. the ability to control our health care and retirement costs. the ability to switch to a defined contribution retirement system for newly hired employees. the ability to quickly realign our mail processing and delivery and retail networks. we need a more streamlined governance model. we kneeled more flexibility in the way we leverage our workers to. contrary to arguments we hear from some parties it is not enough to merely res prefundingf retire health we can implement the five-year business plan. close, i'm sorry the $20 billion budget gap that will be here if we don't act by 2017. return the postal service to long-term profitability. but only if we gain the flexibility in each of these areas. if we do not gain this

flexibility our losses will continue to and we will risk becoming a significant burden to the taxpayers. it is that simple. mr. chairman, we need congress it affirmatively grant us authority to operate the postal service in financially responseable manner. we need full authority to carry out responsibility and provide universal service to our nation. every day we record a loss of $25 million. every day our financial hole gets that much deeper. we can not stay on this current path. let me conclude by thinking -- thanking the committee to address tough issues to pass comprehensive postal reform legislation it year. the postal service is a tremendous organization with tremendous people. we need your help. thank you. >> thank you. >> thank you, chairman and ranng members cumm and other members of the co it if at daing.s hear this hearing isarerepre

private sectors workers that as w as 7 1/2 million are employed by the printing, publishing, paper, direct marketing, e-commerce and shipping industries, that rely on a strong postal service. indeed, our affordable universal service is crucial to the american economy and to american businesses that generate 95% of all mail. my written testimony offers a comprehensive set of options to restore the postal service to solvency. this morning i will cover, this afternoon i will cover the issues you specifically asked me to address in your invitation. on cost savings, the nalc and the other postal unions have contributed billions in savings through collective bargaining. that process concluded for just 12 weeks ago. the new nalc contract emerged from interest arbitration that focused on the financial condition of the postal service that led to award if you want to provide postal service with huge savings in the years to come. as we did during the great

recession when we worked tirelessly with management to adjust routes to respond to mail voe' done, more must be done and congresseeds to do its part as well. i will highlight two cost reforms from the written testimony. first congress should repeal or dramatically reduce the retiree health prefunding mandate that caused over 80% of the postal losses since 2007 and pushed us towards insolvency. applying private sector retiree funding standards to the postal service will i have about us the best chance to adapt, expand our e-commerce delivery volume and develop new services for our customers as traditional mail volume declines. some suggest lifting or reducing the prefunding burden amounts to a taxpayer bailout but no taxpayer fund will go to the postal service and retaining the current prefunding policy will increase, not decrease

the risk of a future taxpayer bailout. forcing the postal service to slash service, reduce quality and degrade its unique last mile delivery network will simply drive more business away and tip us into a death spiral. we can not destroy the village to save it. second we recommend that congress give the postal service the flexibility to negotiat witits unions to postal only plans within feba this will allow us to use incentives to reduce costs and improve health of postal employees. feba does a good job improving health care costs but we could cut costs further if we use single network providers for hospital services and prescription drugs. we could cut costs for future retirees by better intigrating plans with medicare and by taking advantage of low cost prescription drugs through an employer group waiver

plan. most of the savings that the postal service wants it achieve by leaving feba can be achieved within feba with the right type of reforms. you asked for our position on the federal appropriation for the postal service. for most of the history the postal service in america has been funded by both taxpayers and rate-payers even though we received no taxpayer subsidies since 1983. and it is certainly true that the postal service benefit the nation as a whole, not just rate-payers, by facilitating national markets, strengthening democracy through postal voting and campaign mailings and promoting local communities with newspapers and periodicals. we do not support an annual appropriation to strengthen the postal service. other reforms can do the job without help f taxpayers. nay, our views onrerm a refof the governance structure of the postal service. the goals should be to

with it is primarily the result of congressional decisions in 2006, to mandate retiree health

prefunding and it impose strict, price controls on postal rates. we will have to continue to make difficult changes but reversing or revising these policy choices are crucial it saving the postal service and i urge this committee to do so. thanks again for inving m >> thank you very much. >> all of that online at c-span.org and comments from the postmaster gal next live from the press club here on c-span2. >> i strongly urge you to come up with a number to tell this comttee and the american people, we have a responsibility as well, and for you to say, well, we're just going to see how things turn out, it will determine the size of the post, 2014tores i believe is a tragic and terrible mistake for which we may pay a very heavy price. >> senator, can i comment on that? >> sure. >> senator, to be clear, i didn't say to leave it completely vague. we are today advising

assisting at the battalion level. we'll lift off to the brigade level here this fall. the number of post-2014 is inextricably linked to level we need to provide advice and assist in 2014. >> you have to wait until 2014 to determine that. >> we do not, senator. what i suggested was this is the afghans first summer in the lead. i believe this summer will be the bellwether for afghan performance in the 2014 and beyond. >> this weekend on c-span, marine general, joseph dunford, commander of u.s. and allied forces in afghanistan on expected december 2014 troop numbersers. saturday afternoon at 12:30 eastern. at 8:30 p.m. the dedication of the gabe zimmerman etg om. he was fatally shot as he rushed the gunman that woundeboss gabrielle sunday 9:00 p.m. eastern and pacific, fm london. portions oformer british

emierarga thatch -an2, booktv head to loles for "the l.a. times" festival of books. live coverage both days and your questions for authors at the festival. on c-span3, american history tv looks at revolutionary era printing. that is sunday at 7:00 p.m. eastern. . .

members of the general public are attending to it's not necessarily evidence of a lack of journalist tick objectivity. i'd like to welcome or c-span and public radio audiences. our luncheons are feet tired on our member produced week he podcasts available on itune and you can follow the action on twitter. after our guess speech concludes we'll have a question and answer period. i'll ask as many questions as time permits. now it's time to introduce our head table guest. briefly as your name is announce seileyeporter for times. sior businessr for nprnd a press clubem rk and sales officer and executive vice president. jerry washington bureau

chief for the buffalo n ronald strollman, the deputy postmaster general. alice sewn fit jarred, project manager for financial and state news for the center for public integrity. skipping over the speaker. laura lee, producer for national public radio and the. and megan brennan. phil polomanty, the edit for federal employees news digest. [applause] our guest today runs a company that serves over 300 million americans as customers and has enough employees to make it the second largest employer in the u.s., among publicly traded companies,

if it war to offer shares to the public. in in spite of its sizes the enterprise lost nearly $16 billion year. the postmaster general is here. with the explosion of electronic communication, postal service delivery of snail mail is still a crucial part of american society. but the dir financial c herganization may hinder its ability tofill famed creed of completing deliveries through rain andw a set and hail. in february, mr. donahoe announced a plan to end saturday mail delivery a change he said would save $2 billion a year, or an eighth of last year's loss, but at the urging of unions and congress members the postal board blocked the reduction in service. congress has also blocked plans

to close up to 3,000 post offices across the country, and to cross processing plants that are were built for a mail network that used to carry a much higher volume of letters. with merely half a million employees he is no stranger to union issues. healthcare and pension plan create mounting pressures on the post office. and 80% of the organization's 2013 budget, percent mr. donahoe said won't likely decrease even as the service downsizes. a requirement to prefund 75 years of healthcare benefits for future retirees further burdens the organization that is supposed to be hundred% lf-fbuhat maxed out its $15 billion credit line from the u.s. treasurery, and if things were not bad enough, this week the postalvice deaters lacn

that we mailed to a u.s. senahere mr. donahoe is a lifelong postal employee, serving in various roles for more than 35 years. he gap his work with the service as a clerk in pittsburgh, and is a proud grandfather. please join me in giving a warm press club welcome to postmaster general, patrick donahoe. [applause] >> thank you, ang los angeles for that kind introduction. it's a pleasure to be here today and speak with everyone, and we'll make sure that we've got time for our questions. i'd also like to thank the national press club for the invitation, and organizing today's event. the last tomorrow i spoke here was 18 months ago, and i gave a speech that made the following

points. number one, the postal service is a tremendous organization, and it's in a financial crisis. number two. congress needs to reform our business model and give us more flexibility to solve our financial issues. number three. the lack of quick action by congress will doom the postal service from and force it to become a burden on the american taxpayer. and i was thoroughly tempted to give the same exactech again, but i thought, have i become thatit being frustrated y the lack of progress on social reform legislation over the past few years and i will tellou i'm not cynical about it and not so cynical i would deliver that same speech again. in fact i'm more optimistic than ever about the future of the postal service. a few weeks ago the congress

blocked our plan to transition to a new delivery schedule. we said we could deliver packages, monday through saturday, mail, monday through friday, and keep post offices open on saturday expect would save the postal service $2 billion annually, and a necessary part of closing a gap which could be $20 billion by 2017. the american public supports by a large margin more than 80% support it, once they understand the facts, including citizens over 55 and citizens in rural areas across the board support. it's the financially responsible thing to do. and yet congress pd bill stopping us in o tracks. aim cynical? i am not. i believe we will get the flexibility to move to our new delivery schedule because it is the right thing to do. congress faces a simple choice.

it can decide to start appropriating a lot of money to prop up a broken postal service, or it can give the organization the flexibility to operate more effectively. and in case you're wondering what that cost might be? the cost of propping up our growth model, including resolving all the debts and defaults we can't afford to pay, might be in the neighborhood of $58 billion, and that's just through 2017. and you know what? it would be completely unnecessary. it may shock you to learn the postal service could be profitable today, and in the long term future. we just need to operate differently. and so i am optimist stick. i'm optimistic congress will pass a bill this year, and i'm optimistic about a restructured postal service for the future. earlier this week we published an updated five-year business

plan. our plan closes a sstantial budget gap by 2017 and puts the postal service on sound financial footing for years to co. and what is impornt about the plan, it's not the ft t they mat ', because i think anybody here to figure ou a way toake th add up with extreme choices. his plan can be implemented in a responsible manner that is fair to both customers and employees. we do not have to resort to layoffs. or contracting large chunkses of business out. we don't have to make radical changes in our products or services, nor to our pricing. and we do not have to be bailed out by american taxpayers. do we need to make some substantial changes? yes. can we do it in a responsible way? absolute limit but we cannot -- absolutely, but we cannot afford

to wait. time is money. if we do not start making some of these changes we'll only be left with extreme options, and our situation, if you think about it issue is not so much different than what the rest of the federal government faces and state and local governments face today. we have to get ahead of these fiscal imbalances. if we want to avoid major noticeable disruptions at a later time we have to make responsible, thoughtful choices now. and that's what our plan aims to do. one of the most important changes we think in the plan is to take over our healthcare plan. everybody believes the federal ems overly generous in terms of befs. e truth is, theer healthcare system is not overly generous to our employees. but it is overly expensive. and that's why we want to shift our employees and retirees from a federal system to a privately run plan.

and when we do this, we'll be able to provide our employee and retirees with the same or better healthcare coverage and a dramatically lower cost. such a move would save our moneyees and retirees in our best estimate $700 million a year in annual premiums, and would save the postal service $8 billion because we would effectively eliminate the need to prefund minute day further. we would also be able to invest much more in effective middle east and willness programs, which we can't do now. financially it's a smart move and also the responsible thing to do. for both the employees and retirees, and it makes so much sense that it fells me with optimism that congress will support it. we have to move in this direction, and i believe we will. one of the concepts relates to

tension and the notion of the postal employee of the future. and as lang said. i started as a clerk in pittsburgh in 1975. 37 years, almost 38. i went to the university of pittsburgh. by day. at night i was clarke in downtown office office. so i think a lot about the organizational change with a lot of my experiences coming up through this p and i've seen tremendous change in the mailing industry. not just the postal service. our entire industry. in the last ten years. and i will tell you this. if you think there was a lot of change the last ten years, wait until we see what happens in the next 10 to 20 years. it's going to be more dramatic. we'd be hard-pressed to say what our industry is going to look like in the year 2030 or 2040. think about that. but a young person we hire today, leak i was hire, 20 years old in 1975, will probably be

here working well past the year 2050 and probably in today's environment, past the year 2060. our current retirement model is designed to give an employee defined pension after a long career. and it's a model that made a lot of sense in the 1940s and 1950s. but is not going to be appropriate for the 2040s, and the 2050s. our role is becoming far too dynamic to make promises about pensions 40 and 50 years down the road. the benefit of the defineed contribution system is it gives employees options to consider. if job changes are possible, why hoeople toent they may not be able to use for 50 years? le we're currently on a trajectory to hit about 400,000 career employees by the year

2017. and that's with all the changes we propose, six to five day and network changes as we some rink down, -- as we some rink down, and we have a lean work force from the standpoint of the network and the six-day delivery. after that we'll start hiring people. in fact we estimate in the next ten years between 2017 and 2027, depending on volume, and volume is the key here -- the postal service will be hiring up to potentially 20,000 people a year annually, to replace our workers. we are -- i'm above average in that i'm 57 years old but our average is 54 years old in this organization so we're going to have some people leaving the organization. we have to put a retirement system in place that is appropriate for these new people coming online, and it's got to provide high level of certainty in an unpredictable world i'm confident we can tie our systems

into the systemsk the federal this savings plan and can active employee contributions and enable our employees to plan for and manage retirement finances much more fectely than they do t. it would be portable. which is going be very important going forward in this world. i would like to have a defined contribution plan in place for every new employee by the year 2015. it's about continuing to be a great place to work, have a competitive work force, and being fair and responsible as an employer. and it makes so much sense it makes me optimistic we can get the authority under law to get this done. and another important area of flexibility relates to products and services we provide. the postal service does not have pricing flexibility. for example, we can't bend a little bit on an offer we have with a customer. let's just say we're asked to compete on a contract to ship

100,000 packages for a potential customer over the course of a year, and we'll provide a proposal and a price, and our great competitors do the same. the potential customer often case goes back to the competitors and say, you got the contract if you can do a little better on price. they don't come back to us because they know it would take way too long to be able to get back to them with some flexibility. what we would like to do is make a deal like that, and then have the regulatory commission just take a look and review after the fact. makes us a lot more competitive. 's shae that makes a lot of sen,nd it would obviously help us to compete makes a lf sense, it makesuse it me, again, optimistic that we can get this type of flexibility. we would also like to have more flex inability the types of products and services we provide. technology is going to transform the mailing industry in a lot of new exciting ways and we need to

sport the speedup in the transformation. it's not hard to imagine that customers' expectations are going to change dramatically in the coming years. they already have been. if you look around and see the change wes have all experienced, customers' taste changing. imagine being able to use your smart phone to redirect your mail and packages, have them delivered to the current location you're at right now. imagine being able to use a mobile app with the ability to display what you're going to be getting in your mail box over the next few days. that's going to create opportunities for marketers to build anticipation of what is in the mail. when you think about all the e-mails and all the messages you get today. the mail is the one last place where you can get a surprise, and there's a lot of anticipation you can build around that. imagine if you were to get a notification the moment that your packages and your mail were delivered to your door. imagine if the mail carrier had

technolo enabled to show a piece of mail on amarte not only in one kick make a purchase, have it delivered statement. we canmproxpf smile the experience of delivery if he unlock the power of data and digital technology. the postal service is work only these technologies now with a number of our customers to transform the experience of mail and shipping. we're pursuing avenues of product development today that are not restricted by existing laws, and that's good. but we're all seeking additional flexibility in other promising areas. the postal service provides a delivery platform for the $800 billion mailing industry that employs eight million people. it's a big industry. and the way to keep that platform strong is to innovate in ways that improve the experience of delivery, and the experience that people have with their mail.

having the flexibility to create new products and pursue business opportunities is an important way to keep the postal service and the mailing industry in total healthy, and i hope everyone is as optimistic as i am that we can get the flexibility through law to make this happen. as i look into the future there's a lot to build on. marketing mail, or direct mail, it's rebounding nicely. we went through a rough spot with the recession, and despite all the ways t peopl change in terms of communicating and selling produs, marketing mail continues to garner roughly 12% of the total spend in marketing in this united states. it's been consistent for 30 years, and that's because marketing mail provides a strong return on investment for the sender. and i have no doubt that it will continue be a strong and growing part of our business.

the largest and most profitable part of mail is first class mail, and that's what pays the bills. have we seen a decline in the use of first class snail -- snail yes, we have. people bay bills online and it's free and it's hard to compete with free. but there's another part of the story and that has to do with first class mail that businesses send to their customers. it's down a little bit. about 1-1/2% per year since tie but that also includes a substantial drop that we experienced with the recession in 2008 and 2009, and a fairly weak economy since then. but that says that people really do value hard copy statements and correspondence they receive from businesses. they want that information in hard copy and totally .digidef we heard of people that did that and missedayment or nervous on their bill and they say, start those bills back up again.

i say, don't wright the obituary for first class mail. it delivers a lot of value for the sender and receiver and accounts for $28 billion of revenue for the postal service today, and i guarantee you it's going to be around for a long while. the most promising part of our business in terms of growth is package delivery, which is up more than 14% over the last two years. we created much of that growth by innovating and marking offerings and benefiting from the big rice in ecommerce. the way people use the mail and delivery services is changing and i think it's exciting, and i think the changes will create opportunities for growth for the postal service and throughout the entire mailing industry. the postal service is a tremendous organization with exceptionally dedicated work force. our people do a tremendous job, day in and day out. you saw them this week with the ricin threat. the mail got delivered. you saw with hurricane sandy,

mail got delivered. day in and day out and the postal service plays an indispensable role in the american economy, but today it oken. business model that is the good news is we can fix what is broken. it just requires we set ade outdated visions and views of this organization. it also requires that we ask some fundamental questions about what kind of postal service is best for america in the future. we know we can't stick with our current structure so we have to create a new one, and we have to be bold because the scale of our problems are pretty large. and in the past the postal service roared a financial loss of 15 pat 5 billion. i'm tired of talking about that included in there is an $11 billion default on payments due to the u.s. treasurery and we used up all our borrowing authority. last year we only had four days of cash on hand at one point, which mean wes came close in

some cases to not be able to pay our bills. the postal service can't continue to limp along in such a weakened financial state and it's unfair to the businesses that support us. we need to provide customers who -- comprise every part of the american economy with the predictability and confidence they need while they're investing in the mail, and the best way to do that is for congress to help us fix this broken business model. the sooner the better. we're asking congress to give the postal service the authority and flexibility to close what could be a $20 billion budget gap by the year 2017. we can achieve this. if the postal service can get ahead of the surf be profitable for years to come. and it can be done without being a burden to the american taxpayers. all it requires is flexibility

and in a few key areas, the ability to determine our own delivery frequency, the ability to develop and price products quickly. the ability to control our healthcare and retirement costs. the ability to switch to a defined contribution retirement system for newly hired employees a streamlined government model and more flex inability the way we leverage our work force. i am encouraged that congress is working on legislation to address these issues. i am optimistic that we will gain these important areas of flexibility, and if we make these changes, i'm confident that the postal service will better serve the american public and drive growth in the american economy into the future. we are on a responsible, common-sense path to create a postal service that can adapt to a changing world. if we just require the authority to make it happen. thank you very much. [applause]

>> you said you'reimistic about congressional action this year. what makes you optimistic? >> well, i thi tre's couple things. number one, if you think about what has happened over the past few years, there's been a lot more of attention to this issue. i think from an industry perspective. between our initial five-year plans year, from what congress hears from our employee unions, management association, the customers. people know we have to fiction this issue -- fix this issue. i was encouraged by the hearing in tsehe h there l o discussion afterwards saying we need to fix this and we need to move. >> lawmakers from the house and senate said they were going to meet this week to begin discussions on hashing out a

bill. what have your heard about any meetings and any progress on actually putting a bill in writing? >> we're waiting to hear the outcome of any meetings that happened. i think one of the things unfortunately this week that caused a little disruption has been is what's gone on with the ricin threats and those concerns, and it's been disrupt testify i know especially on the senate side. so we're waiting to hear. i think the leaders in both the house and senate and both parties have expressed to us their desire to move on this. i think the other thing that speaks well is the fact th chairman carter's hearing, a month and a half ago, a representative came in and testified they wanted to move ahead. >> paint for us the picture what happens if congress doesn't pass postal reform legislation this year. >> well, our board has been concerned with this. that's why we've taken the

actions we have taken. let me give you a little time frame on that so you understand a lot of the thinking behind that. last fall, we thought that after the lame duck -- before lame duck session began, we would have an opportunity to see some legislation that looked pretty encouraging encouraging and at the last moment things didn't get done. our board has been concerned, as i mentioned, about liquid. >> last year we came dangerously close, four days' cash is not a good idea for somebody that pays as many people and businesses as we do. so the board said go back and relook and see if you can speed some things up. so we came back with some recommendations, some that the board gave thumbs up on, some said hold off on. a couple, consolidation and the move to'm five-day mail delivery. the intent was to make sure we do what we have in our control and be responsible on keeping kg the liquidity in the

organization. decisionou weeks ago in congresso tnge thertty muchim us from making the six to five-day move the board has said to us, evaluate pricing. is there some things we can do in there? reach out to the unions and management associations and see if there's somethings we can do there. so we have to keep every option open. what we would much rather do is get this legislation moving now because time is money. >> recently senator carper said august is a goal for passing postal reform and congressman issa said the goal ills the end of the year. what are you doing to regroup your strategy to make the move faster? >> well, again it would be our hope that it would be done in august. i know that as before, maybe they can get everybody on the timeline to get it moved that much quicker. our biggest fear is with everything that congress deals with you never know when something comes up that ties

everybody up with more attention, so from our perspective, based on the finances and on the fact that what i said to you guys before, the quicker we move on these, the better. so we'd like to see it move as quickly as possible. >> you said that you don't want and you don't need a bailout, but is the postal service headed for a bailout regardless of whether you don't need or don't want one? >> well, let me talk about bailout. i think that the worst thing we could ever do as an industry is let that happen. i also think within this industry i would encourage you to read the five-year plan. to provide some feedback. but that five-year plan says that everybody puts a little sacrifice in, and a little is the word. if we don't end up in a situation where we put that little sacrifice in, i will tell you, eventually we'll be sorry for that, and i don't see there's a big taste in the american public. we didn't see is in the polls --

when we asked the question do you want to -- would you support a bailout to the postal service to maintain six day deliver y, 90% of the people said, no. they don't want to do that. i think after the pushback you have seen around the auto industry and the banking industry and the insurance industry, there's not that much of an appetite, and in a very different way, think about what happened with those bailouts. gm last four different divisions. so they had to make substantial changes to come out much smaller, much leaner in order to close the gap going forward. ...

taxpayer. if you think about it, the american taxpayer has a lot of options. they didn't have back then. the worst thing we could do in this organization is hurt from a pricing perspective, people who use the mail for their products, heard from a service perspecti perspective, erratic service. we have to address some service issues like saturday delivery issue. but if you're hit and miss on a service perspective, if you chase people out of the mail, it will only end up hurting this entire industry. i would encourage to step up and industry, five your plan, give us feedback so we can push it as quick as possible and get this

legislation done at the same time. >> the last time you pushed proposed reform of course youpit is looking to change. how do you ensure that measure that would be pa wch need and want to do?oab >> letesay someg about the prefunded. i think it's important. i think that we are responsible, period, for our health care. there's no way in the world. it is irresponsible for people to be standing there saying, well, we shouldn't have to prefunded. nobody else does. that's like when you're a kid say nobody else does their homework, so why shouldn't have to. if we expect this organization to get benefits, we are respsi pangfor them. so what we have to do is to figure out the best way to do it. our own health care plan and the suggestion came up the other

day, we could support health care plan that was managed or was operated to the fda. i'm fine with that. as long as it reaches the same outcome of a better plan at a lower cost for the employees, a better plan at a lower cost for the retirees, and elimination of the pre-funding going forward. that's a critical issue. that said, when the pre-funding was passed in the year 2006 it was a very different postal service. let's do the math for a second. if you go back to the year 2003 when prefunded first started to be discussed and a lot of other situations that ended up in that bill. we delivered in 2003, 51 billion piece of first class know. there are very few people in this room who could see clearly into the future to see exactly what's going to happen. but iftheyould've nown 0 years ago what they know today it might have been different. because today will deliver 21 billion. if you take that 30 billion

piece difference at a 46 centigrade come you're looking at almost $14 billion in revenue that has evaporated over that timeframe to i would say to you in 2006 the congress passed a law think that they were doing the right thing. i can't fault them for that. that timeframe, the burden, that tenure burden, that was tough but even at that time if you think about the fact that if we hadn't lost substantial volume or flaws with electronic version and the recession, we would've been a lot closer to be able to make those payments. our employees have done a tremendous job making up the difference from a lot of the volume we've lost. so the key thing is this, on the legislation we have been very involved. ron stroman and his team i think of done an excellent job, and joe and megan and jeff, tony, and marianne on our leadership team have done an excellent job

shepherding this five your plan in place. what we can do with a five your plan, any scenarios running through the mall and see what might look like. so we are looking at things now and trying to look ahead, and that's what we've proposed defined contribution retirement systems. because we know that will help reduce costs and provide much more claity going on in the future. said the key thing is knowing what'se bill,ng somhe white way, trying to push the things we've got nfib plan. you will have a successful postal service for the long-te long-term. >> got several questions on the ricin letter sums we. tell us first of all, what's the latest on the test of the substance, what do we know that might be new on that? >> i'm going to tell you what i know pretty much, i think that i'm allowed to say. the ricin was mailed by some fellow down there in mississippi, known from what we understand, the way came through

the system, our best information right now is it's in a format that is used roughly broken up, not something that you came out of the envelope or not something i cannot of any other way. we have very quickly us as we found out about it, i was here because we didn't find out until long after it started rolling. we reached out to employees continues, medical people that we are in contact with under contract and the cdc to get the messe out. the person is been apprehended and we don't know if anything else is in the system in terms of any of the letters at this point in time, and we've got to make sure and we will go back any recommendation that we get from the cdc or anybody else in that area as far as next steps that we might have to take, we will take it. >> how was it detected? wasn't some sort of machine that automatically detects the dangerous substance? was a visual inspection? >> it was detected over in the

mailroom of the senate. and it was, what happened is they do the opening off-site and i guess somebody said look at this. i didn't see what was on the notes or anything like that. a lot of people right is definitely what it it is and they do a test and that's what they found out. >> as far as you know how many postal workers been exposed or gives any workers in congress? are you concerned for the safety of any of them? >> the way, what we understand about ricin, there to think should be careful. one is inhalation if it's finely ground at almost -- we do not think from every indication there's any concern there. or and justin and nobody's eaten any of it. what you have to do is again, just make sure you can council everh agkbtpf comem.inge sites have done me re someone is no or is okay. that way if they had to get to the doctor safely.

>> a questioner says, i'm just a regular person. does the postal service screen my mail for poisons like rice and? >> no. [laughter] >> going back to legislation. questioner talks about the losses over the past several fiscal years that are attributable to the prefunding requirement and says, why have you not been more vocal in making the magnitude of the loss of traditional to that more part of public knowledge, and are you focusing more on congress with changing that? >> the key issue we face, bar none, is the loss of volume, period, exclamation point. this industry is the same, is facing the same issues that the many people sitting up here in the newspaper industry. you've got technology change. you've got substitution.

you've got competition. that's what's happening to us. people pay bills online. when you lose 30 billion pieces of mail, that's what continuing to affect this organization. and it will continue. and as you have options to go electronically with advertising mail, or electronically with first class bill, presenting statements which isa very scary thought for us. that's why we've got to keep the price right and service levels where they are. that is the major threat. the prefunding issues are solvable 100% by managing our own health care. it is not managed by bunch of people in the postal service. we compete actually in a person in this room. i would say there are people in this room who have enjoyed very good health plans because your companies or the groups that you belong to have competed. you've got good benefits and you're able to address those things going into the future. the key for the health care, it's not we want to run away from our responsibilities. we want to be exactly what we

should be. so postal service is paying for medicare, with the psychological tribute to the medicare in the united states and it is paid for by our employees and by your postage rates. it's irresponsible for me to say oh, we should make people go on medicare. every other company does. that's what we should do and we should have a system set up at a person is on medicare they are not caring, our fully loaded federal health care system which we do today. there's no wraparound plan and the federal system. that's why we need to change this, okay? that's what the federal system should be change. not just the postal service. so that you can actually pay for what you should be paying for. our retire to aven h the plan because instead pay fof the $12,000 pikeville pay for a portion of a five or $6000 plan. when you take it over the course of 500,000 retirees, that adds up to a lot of money.

that issue is fixable. what is not fixable is the fact that paying bills online is free. we will is another $5 billion worth of single piecemeal and we can't stop that. but to say, let us take responsibility and do it in a responsible way on own health care plan, downsize the infrastructure, focus on packages, set up retirement plans for people in the future that are more affordable and focus on those types of things to build a strong postal servi service. >> questioner says, absent post reform legislation i would add, or even if you get reform legislation, do you plan on maintaining current first class delivery standards or do you plan to change into account in the closing of more processing plants? >> apps and postal reform you see a grown man cry.

[laughter] here's the thing on the stand if st back anink about it, as we made the changes, our employees have done a tremendous job. our service measurement for commercial first class mail, single piece's first class, standard know, periodicals, instead of all time high. people are doing a great job. we are consolidating because we've got all kinds of excess capacity. the problem that you have in a shrinking world, whether it's a shrinking phone or shrink around or whatever you want to say, you come down to two choices. if you are a customer, the choice is shrink infrastructure or raise pricing. we don't want to do that. we would much rather keep the prices for a predictable so that you can keep your business predictable and we keep the revenue stream at 65 going where we're at it. if you are an employee, the choices are shrink infrastructure or eventually shrink wages. it's that basic.

because there's no other out in any of this. that's why we've been so adamant about laying out a plan that is fair, that it does hurt anybody inordinately, that it tries to get ahead of the kurds we don't hurt the employees, get head of the curve so you don't hurt customers. and pushed that plan and get the thing done. that is critical. and that's why talk of not getting postal legislation through is something we should not entertain as an industry. we have an opportunity to get this thing fixed. and as an industry we need to get this thing fixed. >> questioner asked, after restructuring can of soda guaranteed to continue universal service for folks in montana, alaska and other far flung places like that? >> absolute positively. let me say this, people have said things -- let me say to you, some people might take this as an insult. there's a lot of people that say things with no responsibly for a, what they say, or the responsibility make things happen. whatever i said i am responsible

to make it happen. so nfib world we will continue to provide universal service. the reason why we changed the post plan type of a format easily to provide universal service. people don't hate, i need to use be able to get to my post office and get my mail, and i would like to get my mail without having to drive 30 or 40 miles. i'm not too worried about saturday. i much more worried about being able to get to my mail. and so that's the thing. universal service is our mandate, in this continent united states, alaska, hawaii, long. will uphold and the that mandate. theyey thing is we've got to do it in an infl way because when you let the of horrible si t wil not be anyail in th syst to meet tha a >> questioner asks about the $2 billion savings estimate that you gave for ending saturday delivery. can you tell us, take us behind

the scenes and how you calculated that number? >> absolutely. on a daily basis, if you take the actual delivery days and processing days that we have in the postal service, everyday is worth about four and a half billion dollars. that's what we spent, four and half billion. and so we did issue go through, some work gets absorbed in and some work doesn't. we have put some numbers against that work. is for example, we think that on a daily basis from a percentage of hours and delivery, we used 16 points haven't ours. for rural male perspective we think we can absorb 10% based on the way that contract is structured. would have, we would carry forward that additional 6.5% on to either friday or monday or through the week. from a city carry perspective the number of about 12%. and so i think knowing our employees and knowing our managers, those are conservative numbers. those are conservative numbers but i think we can get easily

get the $2 billion of savings. remember, four and a half billion is what we spend to operate in that ro savings with actual not go on the street with the exception of package delivery which will be doit dynamicouting, with a lower cost employ whether it's in the room craft or the city craft, that will allow us to provide the kind of service at a lower cost. the mail processing cause, transportation cost, network changes, all money they can come out of the system. we've calculated in what we think, you know, is the revenue loss and we've talked a lot of customers to validate that and we think we're in pretty good terms with it. 2 billion is doable. let me clear something else up. people say it's only two out of 20. it is not. if we had at this year we would break even from an operational standpoint. this year, they should we lose about $1.7 billion in the operating life. that's revenue, line of cost with the exception of workers,

costs and presenting. we would actually make money if we made the 65 move at the beginning of this year. that's what happens with the 20 billion, that gap exists when you do nothing over five or six year period and with inflation that continues to grow. so when people, it's only 10% of cost differential, it is not. it would make up the entire loss this year. >> your fedex air contract is up soon. where do you see going with the contract next? wreoi to be a contract to an air carrier, probably within the next two weeks. it would've been a little earlier but with the decision we had to make sure we crossed the t.'s and dotted eyes with competitors to make sure we knew where they were. >> questioner says, you committed to senator schumer to

keep the buffalo postal processing facility opened until 2015. does that mean to be no large-scale transfer of employees from buffalo to rochester in till 2015? >> who asked that question? [laughter] now it all depends on how answer this question without get a phone call this afternoon. here's the thing. as we have worked through these consolidations, what we've been trying to figure, poor megan, she will be shooting glances at me with his. i keep saying to her, we deliver 35% of all first class mail in one day. that's a bargain for 46 cents apiece i see. and we do it in a very consistently. and so as we been making these changes in the network the one thing we've been working out is not putting a whole lot of that overnight at risk. so we make big changes last indicia, we are okay with it. buffalo starts to bend the curve, there's some other big places and we've just got to be

sure that we will work through that in termsring to t clasmeetingindustry,ofye world is consolidated. where we is to get phone bills in every facility every day, we get phone bills from at&t at like three or four locations, verizon, three or four locations. so when the mail is not dropped at all these plants across the country, you are pretty much left to figure out what you get out of the blue mailbox which continues to shrink, remember, 60%, had to shrink and -- strengthen the ticket the cost out. it's a tricky thing, and that affects things like buffalo and all these other places where we are trying to work through. is a key thing. we have reduced the workforce in this organization by 310,000 career people. we have reduced more of the workforce and exist in any other

company except wal-mart. that's how much it's been reduced. and get 70 people have been laid off? zero. we have been very careful. we have been very conscientious about that. when people say there's going to be massive layoffs, that's bs. they are all say. we are very careful. i come from a city, pittsburgh, where we lost 100,000 jobs in four years. people lost their houses, lost everything and have never in many cases recovered. if you drive up and down the river towns in pittsburgh you will find they can't main streets because once the mills went down, everything else went with it. it has left a mark on me forever that i will not allow that to happen in this organization. there are ways to do things, o shrink whenyou hato shrinkot ht peop it. >> and questioner says, the post office employees in my area feel eed.worked and have a sense of

they have no older americans. about how the post office always gets the regardless of snow, hurricanes, disasters. how can we get that spirit back? >> that's an issue. our people do a tremendous job. we measure what we call -- pretty interesting with all the turmoil what's gone on, the service have gone up. it's because people feel, a, that they do have a good job. our employees, thank goodness can't have got a job that has a paycheck every two weeks, as health care, as the retirement and little bit of the vacation and some of the benefits in there. it's tough on them because they hear a lot of talk. that they're going to be laid off. that's why it's critical to get this stuff behind us. it's the same thing for customers. you can feel comfortable with customers a special been first class mail is if they're fearful that the question i get all the time, when are you going to run out of money?

we don't plan on. will forget one way shape or form intuitive this legislation does because we don't want our employees, we don't want our customers nervous and down in the mouth over this system. the fast we gthisddess, faer buddy will be back feeling good about growing this industry. >> we talked a lot about the cost some. what about the revenue cycle of saudi move in the idea of providing a service to reviving a business and actually selling consumers on wanting to buy and buy more of the products? >> we think as i said in a speech that there is a big upside in mail. if you think about mail, mail is the most special thing you get today. you get more, how many of you in this room, and i need to show fans. how many in this room read your spam e-mail, the stuff that goes in the trash before you ever look at it? i did have a couple people raised their hands less time. man, they are dangers. they want to ruin your computer.

think about, you know, look at the tv summit. i was trying to find the penguin-hockey can do that. there were 19 games. i couldn't -- one was in spanish. seriously. but when you see the plethora of tv, radio, radio sirius/xm, you have to listen to add, all, either the swamp of that kind of stuff, even messengers come across your smart phones today your mail is still the most special and direct way to get people. so if we can high mail into the way people live today, like a get piece of mail are doing a rivlin and his gang,programs you know, ma take a picture or click it or even just swipe thing across her phone. it takes you to a site. one push you can buy in to deliver. there's tremendous value. the fact we've all the citizens

going now, a city carry our rural carrier put put the piecef mail in your mailbox, you will know that it is there and you can type in a message across smartphone or something else, look on page 10 of the catalog for pottery barn tonight, and you can get a special 20% off. there's a tremendous power in the mid. that's where we need to go. but i will tell you if we don't get a lot of these things behind us, this cloud of uncertainty, people will be afraid to invest. we've got to get them thinking about investing. >> chairman issa suggested at the hearing on wednesday that moving to cluster boxes from door-to-door delivery could save $6 billion annuy. a?na tthaspt >> moving entralizprobe delily t 3 billion you. we've looked at, there is why we think 3 billion is a pretty predictable number is because some places you really can't centralize.

there are some geography that is impossible. it would be hard for a customer to do that. we are looking right now, megan and her team have been moving to centralize some business locations, stripmall's and whatnot. they key thing on centralize delivery, you've got to find a win-win. you've got to find the people are interested in doing it. they have been developing centralized delivery boxes, instead getting like a little sliver for your mail, you get a nice big box and you can put packages in there. there are a lot of people who say hey, i will take my metafie to walk down the street have a blog as one of my two packages are in the. there's definitely some opportunities. >> we are almost out of time but before asking the last question, i have a couple of housekeeping matters to take care. first of all i would like to remind you about our upcoming luncheon speakers.

on may 5 we have tennis legend chris ever trust a publisher of tennis magazine. and on june 5 we will present the gerald ford ournalsm award. second, i'd like to presentor gguests with the latest industries other national press club coffee mugs. [laughter] t i use this every weend, thank you very much. >> and for the last question, you are the chief this, t chief spokesman of the postal service to tell us about you and the mail. do you mail letters? do you pay your bills with checks and put them in the mail? are you like the rest of us and changed a lot of those things because i am an absolute, positive biggest fan of the mail. i am. and stands. you know, i probably have eight or nine different types of stamps at home in the drawer, depending on what we said, to what i sent out. i use different stamps. i pay all my bills through the mail.

i get all my statements through the mail. and i get all my messages from the nonprofits in the mail and pay them in the mail. and -- tony. [laughter] and my wife gets about, this is no theater. she probably gets at least 30 magazines a month in the mail. i probably get 10 magazines a month. we are mail fanatics. it's great because again it is the most direct way to reach a person. that's what i'm a big believer, and i know that this industry can do great as we get past some of those things. so angela, thanks very much for the opportunity. thanks. look forward to working with you in the future. thank you. >> thank you ipod that>>or comi. thank you also to our national

press club staff, including our journalism institute and oar for aving organiz today's event. finay, has reminder that you can find more information about the national press club including about becoming a member on our website, and if you'd like a copy of today's program, please check out the site at www.press.org. thank you. we are adjourned. [applause] [inaudible conversations] >> and on your screen to a picture of one of the suspects in the boston marathon bombings. he is from the region and russia near chechnya. his older brother was shot and

killed earlier today by police. the search is ongoing throughout watertown, a suburb about eight miles west of boston. and the area is currently on lockdown. police are asking people to stay in the homes off the streets. we will continue to bring updates and briefings from officials as they become available here on the c-span networks. more live coverage over our companion network c-span. sector is to john kerry will release the annual human rights report live in about 15 minutes. and 4 p.m. eastern, live c-span coverage of the discussion about the economy of japan. with the country's deputy prime minister and finance minister. >> i strongly urge you to come up with a number of to tell this committee and the american people, we have a responsibility as well for you to say, well, we're just going to see how

things turn out that will determine the size of the 2014. i believe as a tragic and terrible mistake for which we may be a very heavy price. i have no speakers cannot comment on that? >> assured. >> to be clear, i didn't say leave it completely big. we are today advising, assisting at the battalion the. we will lift off at the brigade level here this fall. the number of post-2014 is inexorably linked to the level that we believe we need to provide advice and assist post-2014. >> you have to wait until 2014 to determine that? >> we do not. what i suggested was that this is the afghans first summer in the lead. i believe this summer will be the bellwether for afghan performance in the 2014 and beyond state this weekend on

c-span, marine general joseph dunford, commander of u.s. and allied forces in afghanistan aren't expected december 2014 truth numbers. saturday afternoon at 12:30 eastern. at 8:30 p.m., the dedication of the gabe zimmerman meeting room. he was fatally shot as he rushed the gunman who wounded his boss, gabrielle giffords. and sunday at 9 p.m. eastern and pacific from london, portions of former british prime mr. margaret thatcher's funeral service. on c-span2 this weekend, booktv heads to los angeles for the "l.a. times" festival of books live coverage both days with book panels and your questions for authors at the festival andn sericantooka revolutionary era printing from the american antiquarian society in massachusetts. that's sunday at 7 p.m. eastern. >> next, a look at global threats to the u.s. with the director of national intelligence, james clapper, and defense intelligence agency director lieutenant general james flynn. they testified before the senate armed services committee.

this is about two hours. >> good morning, everybody. the committee meets this morning to hear from director of national intelligence james clapper coming from lieutenant general michael flynn, director of the defense intelligence agency on current and future worldwide threats to our national security. the dia, along with the national security agency, the national geospatial intelligence agency, the national reconnaissance office, and the intelligence components of themi seess of the depament of defense but also s the intelligence coy th director clapper heads. director clapper, while much of the information that you provide

through posting a including members of congress cannot shared with the public because of its sensitivity and classification, the people who elected us to serve deserve the best information that we can puicly provide them. so we are glad that you and general flynn are with us this morning to do just that. among the challenges that we face is a self-inflicted wound, one that affects director clapper has rightly said amplifies it the other threats that we confront around the world. that challenges the i'm prioritized cuts required by sequestration. this committee is interested in hearing from both of you today about the impact of the fy 2013 sequestration, and the impact that it is having on the intelligence community's ability to provide us with the timely and accurate information we need for our national security.

this self-inflicted wound is all the more unfortunate because our national security professionals already have plenty to worry about. the most open and interconnected society on earth, united states is uniquely vulnerable to attacks on computer ntw cth aitical to our economy. to the provision of public services and the national security. hostile nations such as iran and north korea are clearly trying to acquire offensive capabilities in cyberspace, and are widely believed already to be responsible for some such a tax. china and russia possess formidable capabilities for cyber theft, such as the theft of valuable intellectual property as well as the more traditional areas of espionage, such as spying on our military weapon systems, plans and capabilities. china in particular appears to observe no limit of the theft of

american commercial technology. that's cyber theft as a threat that cannot be tolerated. i hope we'll hear from our witnesses about the extent of the problem, and the steps that we can and should take to counter it. the asia-pacific region, another round of belligerence from the dictatorial regime in north korea has caused concern here in the united states, and among our allies in the pacific. that regime has announced its intention to resume a plutonium production, has tested a nuclear device in february that appears to have had a greater yield than previous tests. and has threatened at any time to launch a missile that uld further exacerbatenons. we have read about conflicting intelligence assessments, north korea's ability to put a nuclear warhead on a long range missile. we hope our witnesses will be able to clear that issue up.

in the middle east, iran continues to flout the international committee in pursuit of a nuclear program that is a significant challenge to our nation and to most of the world. while the diplomatic arrangement in which iran joins oracle rejoin us the responsible committee of nations, remains the preferred outcome obviously. there is a consensus in much of the world that a nuclear-armed iran is not acceptable, and that all options must remain on the table to prevent such an outcome. we look forward to our witnesses assessment of iran's nuclear program, the impact of international sanctions, on iran, the significance of the upcoming iranian elections and related issues. yesterday afternoon we received an update from the secretary of defense and the chairman of the joint chiefs of staff on the situation in syria.siiocoinuetow wo the day.

an estimate of 75,000 dead in a population of refugees and internally displaced serious now running in millions. yesterday, the secretary and the chairman indicated that questions about issues like serious and use of chemical weapons, the nature and composition of the syrian opposition, and the extent of the ties between the front and al qaeda in iraq would be better directed to today's witnesses. syria is just one of many arab or muslim nations experiencing rapid political change, change and upheaval. while the rise of long oppressed of citizens of these nations hold promise come we've also seen in libya, egypt, syria and elsewhere that it can also have undesired effects. our witnesses assessment of this phenomenon and the challenges and opportunities that it presents us would be very welcome. we have been engaged for more than a decade now in

afghanistan. despite the media's focus on the negative there are real signs of progress. afghan forces are increasingly taking the fight to the taliban on their own, and plans to in our major combat presence there by 2014 are on trck. the greatest challenge to afghanistan security is in the taliban, but the pakistan-based santuary's for militant extremists launching cross-border attacks into afghanistan. i hope our witnesses can provide us with their assessment of whether there is any evidence of a growing pakistani willingness to take action against the afghan taliban, which has been given sanctuary in pakistan. a common thread connecting many troubled areas of the world is illicit trafficking of people, weapons, drugs and money. from weapons trafficking in north africa that is help empower al qaeda there, to

iran's network of terrorists and criminal organizations that enable the reckless pursuit of a nuclear weapons capability. does flow directly threaten our national security and the world's well being. our government is not yet fully developed an effective range of tools to identify and disrupt such networks, particularly with regard to facilitation and financing mechanisms. our witnesses this morning hold vital positions in helping us access, understand, and counter these and other threats. we are grateful for your service, for your advice as we consider the president's budget request. before i asked senator inhofe for his opening remarks, let me remind everyone that if necessary, a closed session will be held following the open portion of this hearing. senator inhofe. >> thank you, mr. chairman. one of the reasons my opening remarks are always short is because i cross off things that

you've already said and that dramatically shortens mine because i'm in total agreement with your comments, mr. chairman, and i think our witnesses for being here. the hearing comes at a time when our nation security is being challenged like never before. you look around the world today, the inability of violence raging throughout north africa, and i might also add central africa, too. and the middle east, rising tensions in the korean peninsula, iran's pursuit of nuclear weapons and icbms to deliver it. and growing cyber threats against our infrastructure. it's hard to take seriously the president's claim that the tide of war is receding eric i'm glad, greatly concerned great concerns underlie this initiations naïve view of the world. it's driving the administration's misguided search for a peace dividend that a don't believe exists. we went through that once before ban t he90s. i wemember thaiscussion.

it's driving drast cs our military, under myreadiness and capability. it's driving reduction to our nuclear arsenal at a time when our adversaries are expanding there. we should be expanding ours. further, the cuts associate with sequestration are having significant impact on the capabilities and the reach of our intelligence community colleges at the time when we are really needing it the most. director clapper, when asked about the effects of sequestration on the intelligence community, you stated, and i will quote now, i quoted you sometimes on this, i think it is very profound, quote a we are cutting wheel capability and accepting greater risk. for intelligence, this is not quite like shorter hours for public parks or longer lines at airports. for intelligence, it's insidious. the capability we cut out today you won't know about that until, you won't notice it. the public won't notice it.

you will notice it only when we have a thinner, end quote. and i think, i believe in that and that's the reason for this hearing today. that's exactly wh concerned about. not only will our military be less prepared to do with the growing ats around the world, we know less and less about the true nature of these threats as our intelligence community loses capability.

in doing so, accept the inevitable risk that we are entering. i must say that i've seen this movie before ascent and often alluded, 20 years ago i served as director of dia, the job mike flynn has now. we would then -- occasioned by the end of the cold war. we reduce the intelligence community by about 23%. during the mid and late '90s we close many cia station, cut analyst, a lot of overhead architecture to atrophy, neglected basic infrtructure needs such as power, space and go and let our facilities decades. most damaging leak we badly distorted the workforce. all that, of course, was reversed in the wake of 9/11. thanks to the support of the congress over the last decade

we've rebuilt the intelligence community as a premier capability we have today. but now if we're not careful we risk another damaging downward spiral. just to repeat the quote, unlike more directly other both sequestration impacts like shorter hours at the parks, longer security lines at airports, the degradation to intelligence will be insidious. it will be gradual and almost invisible until of course we have an intelligence failure. with that preface of the backdrop let me turn now to a brief top of the of global threat trends and challenges, many of which chairman levin, you've already alluded to. i will say that in my almost 50 years in intelligence i do not recall the period with which we confronted a more diverse array of threats, crises and challenges our world. to me at least this make sequestration even more incongruous. this year's threat assessment shows how dramatic the world and a threat environment is changing. threats are more interconnected

and viral. events which first blush seem local and relevant can quickly set up transnational disruptions that affect u.s. national interest. issuidentifyastatement for the . our statements this year lead with cyber. as more and more state and nonstate actors gain cyber expertise, its importance and reach of the global threat cannot be overstated. this year our discussion and natural resources is also more prominent because she is injured and jog the, climate and competition for natural resources have huge national security implications. many countries important are living with extreme water and food stress that can destabilize governments and trigger conflicts. on the issue of terrorism and the threat from al qaeda and the potential for a massive coordinated attack on the united states may be diminished by the jihad is movement is more diffuse. as the president said on tuesday about the boston marathon bombing we don't know yet

whether the attack was planned and executed by a terrorist organization, foreign or domestic, or it was an individual act. lone wolves, domestic extremists and jihadists as part of food determined to attack. the turmoil in the arab world has brought a spike in threats to u.s. interest. the rise of new government in egypt, tunisia, yemen andyal along with ongoing unrest in syria and mali provide openings for opportunists individuals and groups. these and other reasons of the world extremists can take advantage of diminishing counterterrorism capabilities, borders, easy about of weapons and mental stresses, most especially a high proportion of unemployed frustrated young males who deeply resent our power, wealth and culture. weapons of mass destruction development and proliferation is another persistent threat to u.s. interests. as you alluded, north korea has already demonstrated capabilities that threatened the united states and the security and climate in east asia.

north korean announced in february that it conducted third nuclear test, bow to restore its nuclear reactor at jong bong and lasher pakistan despite what appears to be a road mobile intercontinental ballistic missile. we believe pyongyang has over taken initial steps toward healing this is although it remains untested. it also uses a logical to put a satellite in orbit in december destined to is long range missile technology. it is devoted to been a country aggressive rhetoric towards deny states and south korea. north korea has not come hower, fully developed tested or demonstrated the full range of capabilities necessary for a nuclear armedisle. characterizing such capabilities for us in intelligence is a complex and nuanced process requiring sophisticated and highly technical analysis but it is indeed rocket science. we are do with many shades of gray here, not a black and white.

i will digress briefly to comment on last years revelati revelation. the state in question was one sentence and a seven page classified report and was mistakenly miss categorized as unclassified. but this revelation is unless you give of the standard dilemma we face in intelligence community and to train what we know to be fact and contrast to what we attempt to impute from those facts. we lack uniform agreement on accessing the many things in north korea, its actual nuclear capability are no exceptions. as others have be there and degrees of ishly really play havoc with servitude. with those looking to find infighting within the ic on north korea, i'm sorry to disappoint. to the contrary this reflects an integrated collaborative and competitive analysis process

that's open to all views. we are by the way in the process of generating an intelligence community assessment on this matter which will formally engage all members of intelligence community. if we all agree, great. if we don't, that is healthy, too. we will clearly portray the various user community to our consumers to include consumer number one. d.i.a. is a crucial part until this committee and its use are valued and respected. i say this having proudly served as director two decades ago. i have confidence in the agency, it's great people and its current director, mike to begin i would welcome the opportunity to discuss details of this with you further in closed session. i make this request and interest of both protecting the fragile intelligence we do have on north korea as well as avoiding for the advancement of the narrative by yet more public discussion and media hyperventilation.as ir learned lesson, adveartch theses , too.tm again d some historicl perspective.

wasn't as di of nga, in the early 2000, i don't like it depends on if it was a national intelligence estimate on weapons of mass destruction in iraq published almost 10 years ago. afterwards the community was roundly criticized for group thing for not vetting sources, not questioning the assumption, and for dismissing alternative views. but we learned some hard lessons from that experience i can assure you. that all said the ic continue to monitor develop its and anticipate north korea's next provocative step. moving elsewhere, iran continues to develop technical expertise in uranium enrichment, nuclear reactors, weaponization and ballistic missiles. from which it could draw if it decides to build missile deliverable weapons, nuclear weapons. clearly, iran has the scientific, technical and intellectual capacity to produce them. so the central issue is its political will to do so. such a decision we believe will be made by the supreme leader,

and at this point we don't know and tell if you will decide to build nuclear weapons. the united states and our allies are tracking serious munitions stockpiles, particularly its chemical and biological warfare agents which are all part of a large conflict and geographically dispersed program. it's advance chemical weapon program has the potential to inflict mass casualties. the increasingly beleaguered regime having found its escalation of violencehrough conventional means is not workins g appeite willing to use chemical eapons against own people. all the worst, nonprimitive group or individual industry could also gain access to such materials. we receive many claims of chemical warfare use in syria each day and we take them all seriously and we do all we can to investigate them. we can't provide additional details on these efforts in this setting. to protect the fragile critical intelligence we need to assess the situation, but we certainly can talk about this in closed

session. looking at geographic threats around the world, some nations of the mideast, north africa are making progress toward democratic rule the most our expense imbalance and political backsliding. in iran, leaders are avoiding the unrest in the arab world to spread influence and undermine the united states and our allies. tehran also faces a worsening financial outlook in the fall of the assad regime in three would be a huge strategic loss for iran. in iraq, tensions are rising between the majority shia, minority sunni as those with the kurds. to this point, al qaeda in iraq has t mustered the strength yet to overwhelm iraqi security and exporting oil at its highest levels in two decades. islamic actors have been the chief beneficiaries of the political openings in islamist parties in egypt, tunisia and morocco. they will probably solidify their influence this year. after more than two years of

conflict in syria, the erosion of the regime's capabilities is accelerating. we see this in its territorial losses, military manpower shortfalls and logistic deficiencies. the opposition is slowly but surely gaining the upper hand. assad's days are numbered. we just don't know the exact number. the regime's aggressive violence and the security and security conditions that lead to increased seven casual is now estimated at least 70,000. the violence and economic dislocation of also led to approximately 3.6 million syrians being displaced and for the 1.3 million refugees have fled syria hich intensifies the pressure on it neighbors. egyptian elections originally scheduled for this month will now probably be pushed fall. along wi eir postponed, the greater the potential for more public dissatisfaction, even violencendtries, particularly against the backdrop of egypt's profound economic challenges. incented africa we are

monitoring unresolved discord between sedan and south sudan, fighting in somalia, extremist attacks in nigeria, a glass of government in northern ireland and renewed conflict in the great lakes region. mollies security hinges on france efforts to undermine terrorist networks in the region, as was by efforts by the african led international support mission in mali or by future u.n. peacekeeping operations. west african countries have deployed troops to help stabilize northern mali. moving to asia the taliban led insurgency has finished in some areas of afghanistan but is to resilient and capable of challenging u.s. and international goals. the coalition drawdown of an impact on afghanistan's economy which is likely to decline after 2014. in pakistan the government is not execute a much-needed policy and tax reforms and the company -- country faces no prospects for sustained economic growth. on a somewhat more positive note dispatcher the armed forces continued operations in the areas which have been safe havens are al qaeda and the

taliban. and pakistan has established national provincial assembly elections on may it will mark a historic first if they transfer government peacefully. in china last month, huge and pain ecame president his country can do to supplement its military to put those by bolstering maritime law enforcement to support its claims in the south and east china sea. russia will continue to resist putting more international pressure on syria or iran. it will also continue to display great sensitivity to missile defense. closer to home despite positive trends towards democracy and economic development, latin america and creating content oaw recovery from natural disasters and drug-related violence and trafficking. in venice with the presidential election occurred four days ago to decide a six-year term of the wake of former president chavez's death in early march. officially announce results indicate ruling party candidate

nicolas one in a narrow victory. so in sum, given the magnitude and complexity of our global responsibilities, insightful persistent and copperheads of intelligence, at least in my mind, have never been more important or more urgent. i had trouble reconciling this imperative with sequestration. with that i thank you for your attention and now i will turn to general flynn for his statement. >> thank you. good morning chairman levin, ranking member inhofe, a distinguismothe committee. thank u for this opportunity to testify and for your continued support to dedicate intelligence professionals of the defense intelligence agency and the entire defense enterprise. many of whom are forward deployed to supporting u.s. and allied military forces in afghanistan, as was in 141 countries and two under 62 locations around the world. i have been the director bernard eight months now and i cannot

over emphasize how proud and privileged i am to serve our nation in this capacity. .. frishe matt weapons of mass destruction an er looming and dangerous threat of cyberattacks against our defense industrial base as well as other critical components of our nation's infrastructure. i view the latter thread is the most dangerous threat we face today. this opening statement along with my more thorough statement for the record reflects the best

analysis and is based on cia's worldwide human intelligence technical intelligence counterintelligence and measurement and signature and collection as well as a world-class national level document and media exploitation capabilities. additionally our mission is executed executing" version with her intelligence committee partners are international coalition partners as well as a full range of open source is available in today's information environment. our customers run the gambit from the president of the united dates on down to her warfighting combatant commanders but the most important customer we serve are the soldiers sailors airmen and marines and civilians who serve their nation around the rld who are willing to stand in harm's way to protect o country. without restating what director clapper has addressed i will simply say we face a complex and interconnected global operational environment characterized by a multitude of actors. this unprecedented array of threats and challenges include

the continuing threats from the taliban insurgency in afghanistan, al qaeda and terrorist organizations in the middle east and africa, terrorist havens in pakistan the popular people's in the aftermath of syria egypt and elsewhere in the middle east iran sustain nuclear and missile development north korea's continuing nuclear and missile propagation's, the growing seriousness of cyberthreats to our defense industrial base our bityn's critical infrastructura particularly from china and iran and finally the growth in china's economic and military power. all of these factors play significant demands on the defense intelligence agency and the entire defense enterprise. as stated above i believe the most -- threat of cyberattacks through the daily occurrences of threats or damaging a variety of levels and not only persistent and dangerous but likely have serious damage to our national security is very real.

potential adversaries are increasingly more capable of conducting cyberoperations. cyberattacks remain an important and increasing transnational threat to the security of the united states with state actors such as china russia iran and north korea integrating theselii io thei intelligence gathering methods and warfare doctrine. malicious actors including terrorist organizations have also demonstrated awillingness and capability of cyberset means to attack u.s. interests. one final point with regard to cyberattacks that we need to keep in mind. behind these attacks are human beings and some are nonstate individuals, some are state sponsored network studies with increasing capabilities and harmful intentions to do damage to our national security. lastly the cia's mission includes providing a defense department strategic warnings giving the enduring impact of the arab spring the ongoing turmoil in syria persist in

territorial disputes globally and emerging transnational threats previously described. all these ches ndore for effective strategic warning and long range for sites to prevent strategic surprise. strategic problems such as proliferation of mass destruction state on state conflict and instability resource scarcity and terrorism remained at the forefront of u.s. warning concerns. however strategic surprise not only as a deliberate deception to our adversaries but also stems from human and social dynamics to the small and varied interactions with seemingly no immediate relevance to the department depends and rapidly evolved and alters u.s. policy. tocover these chges the cia in partnership with the intelligence community are combatant command encloses international partners monitors the interactions using mliry political technological economic and social development. replace these events in the nt of history, culture religion and physical and

geography. our ability to understand these interactions provides precision advantage in the face of unforeseen events to anticipate surprise. technological change has the potential to create surprise. less developed countries and nonstate actors may surge with innovative capability that can counter u.s. military capability. proliferaprolifera tion of advanced technology and rapid improvement in commercial off-the-shelf technology will a development of new commercially enabled asymmetric threats and improvement in communications and speed the proliferation of advancing commercially available technologies. in order to meet these challenges the cia through a strategy and transformative vision 2020 driving change change their integrative processes undertaken several initiatives intended to increase the efficiency and effectiveness of the cia and the defense intelligence enterprise. the single biggest component which is our need to take the right lessons learned from a war and close into greater

intelligence operations their uniformed services combatant command intelligence community teammates and our allies and coalition partners. to conclude, today's focus on combat operations in afghanistan against insurgents and transnational terrorism around the world does not preclude potential that other threats will come to the floor including conflicts among major countries that te with u.s. interests. defense intelligence must fail to provide timely and actionable intelligence across the entire threat spectrum. in close collaboration with the intelligence community cia strengthening collection and analysis insuring more nation across intelligence disciplines to cover our nation's closest allies. the men and women of the cia in our entire defense enterprise no they have unique responsibility to the american people and take great pride in their work. i'm honored and privileged to serve with them and present their analysis to you it on behalf the men and women of the cia and the entire enterprise thank you for your continuing

confidence. your support is vital to us as well as our national security and i look forward to answering your questions. >> thank you very much general. we will take an eight-minute lightning round. direct your clapper iran has been a continued, continues to enrich uranium and stockpiles that uranium. currently under iaea safeguards. the concern however is that iran might be able to stockpile enough uranium to enrich weapons-grade uranium and to produce nuclear weapons in a relatively short period. your prepared statement includes an important assessment that iran could not divert safeguarded materials and produce a weapons worth of uranium before the tivoli is discovered. can you tell us about how much warning you believe we would have quick. >> clearly we continue to hold the most likelyssessment, our

assessment is that if they were anm which d a dead giveaway it wouldn't be produced other than for a weapon most likely scenario is the would do that covertly. to actually slow the time or lengthen the time to which they could develop a testable single weapon. clearly, if they were to do a breakout using the facilities they have now to enrich uranium which is as you indicated under safeguard and under iaea supervision that clearly is a real bellwether. that would be a big warning. if they were to do thatch i think is the least likely scenario, it would be a fairly brief time as we indicated in a

statement. >> a fairly brief time? >> well there are imponderables they are on how an industrial process you are involved in, so there are all kinds of factors that can affect that time but we are talking about it period of months, not years. >> have they made a decision in your assessment to produce nuclear weapons? >> they have not. we continue to hold that they have not yet made that decision. and that decision would be made by the supreme leader. >> can you give us your assessment of the impact of the current sanctions regime against iran? >> it is having a huge impact on our economy. there's no question about that. any measure you use, inflation, unemployment ,-com,-com ma unavailability of commodities etc. is having a tremendous impact on our economy by every

measure and that said it is not in tuesday change in our policy. >> general plan and director clapper relative to pakistan, has pakistan changed its strategic calculation with respect to afghanistan and more specifically is there any change that we have determined in pakistan's so far unwillingness to deal with the afghan taliban which is a sanctuary in pakistan? is that still they are on the ground position that they are not going to take on or deal with were put in jeopardy the afghan taliban that is inside pakistan? >> i will say that the tenant to

remember here is that the primary strategic interest of pakistan is india, and so days view whatever they do in afghanistan through that lens of their preeminent eanone they arh is india. so to the extent that they can maintain visibility and influence in afghanistan i believe they will continue. >> there is no change that we have a surrogate and pakistan and so far their unwillingness to take on the taliban inside pakistan? the afghan taliban? >> inside pakistan is reset to the taliban in pakistan certainly does pose a threat to the pakistanis and they have, when they could -- also i need to point out they have lost thousands of troops in into fata in pursuit of

militants. basaid thave given satuyn akistan. >> t >> itherenyin that? >> not basically. >> all right. in terms of north korea a few have indicated that believe that the difference that has been publicly stated between the intelligence community writ large and the cia on the issue of whether or not, whether or not north korea has a nuclear weapon capable of delivery by a ballistic missile and that is in your judgment a small part of a bigger picture general clapper and that is a nuance issue as you point out. i would think that because of the public league here and the description of this that the best way to determine that there

is a new wants differences to deal with the nuance. >> the best way to deal with it would be to know about it and so as i pointed out the issue here is what we know in fact which we have outlined and what we impute from those facts and that is where you get into the differences in confidence levels that people have. >> you have just heard -- give us what that difference is. >> the difference has to do with the confidence level and the actual ability of the north koreans to make a weapon that will work in a missile. neither we nor the north koreans know whether they have that, such a capability and if they have it if it will actually work. the cia has a higher confidence level than the rest of the

community on that capability. that is the difference. >> okay, that is helpful. in syria, the president set forth a red line in terms of chemical weapons. without getting into the question that you prefer to deal with in a classified setting, can you tell us whether in your judgment director that red line haseen past? >> that's a policy questionnd not one for intelligence to comment on. >> so there is no assessment? without getting into it in public have you made an assessment as to that red line? >> i have not and nor will i. >> all right. you talked about the global jihad is movement direct your in your opening statement. is the continuing operation of the detention facility at guantánamo serve as a recruitment tool for a global jihad is movement?

is the continued operation of the facility at guantánamo a recruiting tool for the global jihad is? >> this has been a long subject of debate and ever since guantánamo was established and there are those has been used or cited certainly. and on their web sites. >> general plan do you have an opinion on that? >> i agree with director clapper's statement here. we have to pay attention to not just guantánamo but also other places where individuals are being held by other countries and pay close attention to what

happens to the position of those individuals and those other countries. >> because it might rat >> it might relate to returning to befieldof the speech. >> thank you. senator inhofe. >> thank yous chairman. i was going to mention guantánamo but just for the record i have eyes observed this is one of the few good deals that we have. i would like for the record for each of you to tell us or to tell me, what is an alternative to guantánamo because i think it's a great resource and it's been used politically in the wrong way in my opinion. the statement that you made director clapper we couldn't find in your written statement so i'm going to read this real quick hre. i was kind of overwhelmed. you said in almost 50 years of intelligence i remembe we have had a more adverse array of

threats and situations around the world to deal with. mr. chairman i think that is about as strong a statement as i have heard. general flynn do you agree with that statement? >> i do. >> director clapper i was going to bring us up the last time i went through this. i was in the senate at the time and i remember you forecast the war is over and we no longer need this. we actually did a lot of tests in terms of i have one that is around 30%. during that same decade with increasing by --%. what other similarities to recall happening in the fata in

the 90s and what we are facing today? anything else? >> well, looking back because of the cuts we were taking i often wonder whether we failed to fully appreciate the onside of terrorism. i remember i got -- about terrorism when i did the khobar towers investigation in 1996 and i ha lcia t e the director. that occurred in 96 and i had left the cia's director in september of 95. i had a case to go back and i saw how little my former agency and general flynn was devoting to terrorism. a lot of this was because i think of the cuts and still trying to get over preoccupation with the soviet union. >> and would probably say we need to remember the lessons of

that currently? >> absolutely, sir. i fear i've seen this movie before. >> yes, sir. it's a gd y of putting it. director clapper sometimes we say things in so many times forget what the original source wasn't i do remember though back and i think it was 07 that our intelligence came to the conclusion that iran was going to have the capability we are looking at now by 2015. that's the first time i remember that date and that really hasn't changed much since then. and my accurate? >> what capability are you referring to? >> the nuclear capability and delivery system. >> well, that date is good. the iranians are pursuing development of two systems that potentially could have an intercontinental capability and the belief is the first tie

they w bdyoo that would be as earl as bot af you we have a hearing earlier this year where we asked general mattis this question. we said, deeply the current diplomatic efforts to stop iran from acquiring a nuclear weapon capability have been successful? his answer was no. do you agree with this answer? >> my aunt javad and i've been asked that under the general comment was that the sanctions are having a huge impact on their economy but it's not lead to led to a change in their policy. >> how about you general flynn? >> i would agree. their behavior and their >> okay. one herns that i have you did cover it director clapper briefly anyway and that is the continent of africa. we are concerned, back when that

was a three commanded now of course it's a one command that the resources under eucom. we have talked to the current one and of course breedlove is going to become the eucom commander. they are all very much concerned as i have been for a time. currently without root reducing resources to does the sequestration the lack of resources we have facing the potential threats on that continent, you talked about, you talked about eucom and we remember going to the somalian province, sudan and southern sudan. i've been to southern sudan twice and there are new -- being developed and i'm concerned about the fact that we were sure that intel in that whole region. it's not just the countries you

mention. you did mention nigeria but there are other places in west africa. in togo, ghana and once they are developing an oil resource down e problems emee with it sors we are going to i'm sure have to expand our and tell or our eye has capability to that area. do you have any thoughts about the parts of africa that you did not mention that are potentially a great threat? >> sir i think you covered it very well. i would just comment that if you look at northern africa, say from mauritania or senegal on the west all the way to sudan on the east, it's about 475 million people and very poor borders, weak security services and of course the place is awash in weapons. all these and most importantly a

very high proportion of thepoond unemployed males who are frustrated and are easily attracted to the jihadists cause. that whole area i believe and the other countries you mentioned i think are going to be a tremendous challenge certainly for us in the intelligence business, a big challenge. we don't cover them equally and so we have focused on other areas. the challenge will be how to bring to bear particularly in the isr arena the capability to africa. >> well africa is unique in another way too. you can find a place right now where we have adequate intel and there is not a real threat there but when they change leadership in these countries. look at "debarred.

i know the state department doesn't agree with my assessment of this but when they were taken over by -- all of a sudden you have a new threat that is out there and to stay ahead of that while it's necessary to get a lot of intel prior to that time the regime in my opinion now it is because you're dealing with people who have terrorism in their background. so i would just hope that we would look at some of the potential problems that are there because there are very real in that country. thank you mr. chairman. >> thank you very much center inhofe. senator king. >> mr. clapper, director clapper, you have given us an appalling list of risks today, a long list of threats and problems that we face and you started your testimony talking about the effectiveness of quaestor. think it's important to

emphasize that this of quaestor is not a one year proposition. it's written into law to continue. given that list of threats and given the increase in risk that is occasioned would it be fair to say that the sequester itself is the most severe security threat this country faces right now? >> is certainly as i indicated in my testimony is certainly consuming us and the leadership for what we see happening to the capability and importantly the expectations that we seem to have for our having this global insight. that is going to be very hard. if we sustain sequestration through 2021 and impact if we go through another year of sequestration as i said in my testimony the senate intelligence committee and the day before intelligence committee we collect are going

to have to rethink what we will expect from the intelligence community because it isn't going to be the same. >> general flynn? >> i just want to reemphasize as another se leadein the united states just to reemphasize what director clapper talked about we do not want to damage that vital component of our capability. the sequestrasequestra tion as you on the provides us almost no flexibility not just this year but over the long-haul and one other thing i would like to remind everybody is our adversaries won't take a strategic pause for us to correct ourselves in the real cost a thing director clapper highlighted very well is what i would describe as public insecurity and the potential for strategic surprise and we really won't know what we have missed given the potential damage that

the sequestration will have. i think it's mre insidious. >> we won't know what we missed until something blows up. >> yes, sir. >> let me change the subject to a more specific one. and i asked general dempsey just the other day. in afghanistan as we are transitioning out, it it seems to be one of the key questions is who do the people of afghanistan support? from intelligence perspective are they the karzai regime or with the government? are they with the taliban or what is the status of the sort of on the ground public opinion in that country? >> i think it's very ch a mixed bag andi inthe forthcinelecti assuming it's held time has already

generated a great deal of political activity and i think that's going to be a real indicator of where these loyalties lie. the areas controlled by the taliban, that is principally the rural areas. i think there are probably in control and hold sway. in the urban areas like kabul probably the central government under karzai has more contraction but bear in mind afghanistan is very much a tribal country, sowhtifici a a country in a conventional since when we think about a country. loyalties i think lie mostly on a tribal basis. >> one other more specific question on the sequester

dollars. as ever the figures that you supplied director clapper, we are talking about absolute cuts in real dollars, is that correct? >> absolutely. we have cut about $4 billion in seven months and the classified setting i would be happy to go through the capabilities that we are cutting. spevak that continuesrectuay ree number of the nominal dollars in 2012 is that correct? >> you start with the base of 2012 and take sequestration and the other actions have been taken it is a substantial cut and we don't start to get well until 2022 or 23. >> thank you. one other question on iran. we have had some discussion this morning and in "the new york times" there is an article headlining a report led by

former pickering who was respected in the field who argues that the sanctions in iran are not affecting the decision-makers and in fact may be driving them in the other direction. could you comment on that >> that is certainly one thesis. there are those in the intelligence community that pointed that out that that's a possibility that we have reached a certain tipping point and that's the process to go ahead and builds nuclear weapons. that's clearly a possibility but at the same time at least right now we don't think that decision has been made. >> seems to me the problem of sanctions against countries that are essentially autocratic is the sanctions affect everybody in the street and don't necessarily affect the decision-maker and the supreme leader could hang on. he is not going to have any problem getting bred in bread in the marketplace. >> right, it won't affect them

in that way. what they do wbouto sufficient n the street that would actually jeopardize them. i think they are concerned about that. >> that was going to be my follow pushed in. this political pressure in a country like iran mean anything? >> political pressure from outside? >> no, no from within, in the streets. >> i think it can. i think he can. i think again, perhaps we don't now but perhaps this will play out in the forthcoming iranian election. they have this faction who will put a candidate not embraced by the supreme leader. this could create an interesti political dynamic but i don't know. we will have to see. >> thank you mr. chairman. >> thank you very much.

senator mccain. >> i think the witnesses for being here and their continued service and i don't want to beat a dead horse here on the sequestration but i believe both witnesses, is it true that if this continues our ability to provide the necessary intelligence information for the decision will be jeopardize thereby jeopardizing our national security, would you agree with that? >> i would. >> 100%. >> we seem to be living in some sort of parallel universe here. we get testimony from you and other military leaders and yet there is nothing from the white house and there is nothing here in the congress in an effort to repeal what is a threat to our national security. some of us will keep on trying. general clapper, you and the

secretary of state as we now know and then secretary mattis and the chairman of the joint chiefs of staff some time ago supported the army rebels. why did you take that position? >> sir, i have never spoken publicly about the decision i took in that regard. i don't think it's good for me to do so. it's advice from the president and that's between him and me and i don't think it's appropriate to talk about it. >> don't think is appropriate to talk to members of congress about your views on a situation that's going on where several thousand people have been massacred? >> i will talk about that. in the advice rendered by the president i won't. >> what advice to give the congress as far as the armed rebels? >> i believe at this point there are lots and lots of weapons in syria and if we are going to expand resources in support of

the opposition i am not convincednow that arming or supplying additional weaponry to opposition will have the desired impact based on cost-benefit. >> what a no-fly zone do that? >> that is a possibility as again in the end is the policy in things not an intelligence question? if and as the opposition gains control of sufficient geography on the ground, then that's a possibility. but, doing a no-fly zone even a partial one is not a trivial undertaking. there are is a mentioned a tremendous array of weaponr and de a v incluer capability depending on who is operating it. a no-fly zone would not do

without cost. >> even though general mattis and admiral stavridis testified with cruise missiles and moving the patriot missiles in the right places that we could establish a no-fly zone? >> well patriot medal -- missiles i'm getting out of my league. that's a discussion for the department of defense but that's essentially a weapon. the theory is they could position patriot missiles outside of syria and somehow provide security over a zone. that would be given the nature of the picture at weapon which is notn area -- >> do you know what's fascinating here general? now you are saying and so did the chairman of the joint chiefs of staff that the situation has deteriorated so much that you

now have questions whether we should supply weapons to the rebels are not. argues that we should have supplied them back when you recommended it according to published reports as well as the secretary of state, as well as the chairman of the joint chiefs of staff. it's remarkable. so now you and the administration sit here and say well, we don't know where the weapons are going. maybe if we had help the people who are fighting from the beginning befohe jiha flowed in to the fighting in israel we might've been able to have some beneficial effect. meanwhile we sit by and watch 8000 or so, the countries and would you agree that lebanon and jordan have been destabilized? >> it has a huge impact on the neighboring countries. jordan lebanon, turkey iraq and the huge number of refugees and

not to mention the humanitarian aspect with the spillover of the fighting. >> thank you. has the support flown into syria over iraqi airspace? >> i will be talking about that in closed session. >> do believe iran will seek to keep assad in power at all costs? >> absolutely. his fall would be huge strategic loss to iran. >> a huge digital loss to iran but yet we don't seem to know of any real way to assist them? that is quite remarkable commentary on the capability for the commitment of the united states of america. how would you characterize russian interests within syriac? >> well, that represents their sort of last bastion i guess in the mideast where they have influence.

there has been a huge weapons client affairs. there is a general aversion to just being in oppositiono and as wellth the russians have concerns about their own homeland from the sampling of jihadist influence to the secaucus so there are number of of -- that motivate the russians but i also think they are concerned about what would follow assad and in the bee careful what you ask for department. >> to iranian support the assad regime for example taking people to iran and training them and sending them back to syria? >> there has been some of that going on, yes. >> there is an article in "the wall street journal" yesterday, the u.s. fierce syrian rebel victory for now.

is that your view? >> i'm sorry, sir? >> senior obama's administration officials surprised in recent weeks with an amended approach to syria. we don't want an outright rebel military victory right now because in the words of one senior official quote the good guys may not come out on top. >> well, if that depends on your definition of good guys. certainly the jihadist the sunni dominated groups, the fighting groups and the opposition most notable on its way to terms of size have recently pledged allegiance to al qaeda. that is a great concern. they are present in 13 of the 14 provinces in iran and are starting to establish municipal

services providing humanitarian aid, food, hospitals and sharia law. >> do you think all this might've been avoided if we hadn't sat by and watched it happen? i thank you mr. chairman. >> thank you senator mccain. senator reid. >> thank you very much . chrman and thank you gentlemen for not only her testimony but your service. the issue at front and center is sequestration and i just have a more procedural question. first of all as i understand it your appropriation is part of the defense of her patient's bill and that we did in fact pass a defense appropriations bill. we didn't do a lot of those and within the context of the bill were you able to achieve at

least flexibility in the prioritization in order to cope with what we all recognize is decreased funding? ogram which i manage travele six cabinet departments in two and two independent agencies. the bulk of the program is carried in the department of defense budget. so, not to get into sequestration are cano here but the program i operate is managed and was divided into 700 ppa's planned program activities which covers the entire extent. every one of those seven ppa's head been attacked. the congress imposed a more onerous more restrictive array of rules on limiting my ability to move money from ppa twos ppa

so iavthese small ppa's with not a lot of money and many of them are only people and forever reason they decided there needed to be more control over the national intelligence program. the effect of the fy13 appropriations package did help us in that. it allowed us to move some money around so we could move the money into the pots that were already committed to by virtue of the fact we -- before we got a bill so it would have been a disaster without it. the downside of course it cap the ppa structure and it did allow new starts which is good but it also for most accounts with three specific exceptions which we can't discuss here was less money at the end of the day with the appropriations act and of course the impact of sequestration was actually doubled because we had to take it to seven months so the real cut there was about 13%.

>> the realistic impact. that is helpful because i think it provides orbit context of the things we might be able to do. again, we have the macroissue of sequestration which i think everyone recognizes as huge and has an accelerating impact on your program but is there -- to have appropriations to at least give you flexibility in view of the ability with the top line more wisely? we have done it in such a way that we can avoid furloughs.

but if i had to ask my wish list would be a really funner ppa schedule. >> that is something that could be done as a macrosolution but micro? senator feinstein and senator chambliss sought to do that and that failed. >> that's valuable insight. thank you sir. i know you have got a range of issues and multiple programs but a simplistic approach, there are he seems to be this two major areas. one of the things that seem to be was sacrifice was --

it can you balance those programs and without getting that will suffer more than the other and it goes back to this quan give you flexibility to manage that? >> that again not to be johnny one note but in this environment the one thing i would ask for is more latitude on how we take the cuts and allowing us the i see leadership and with respect to the question you raised it's an age-old one in intelligence. the approach i have tried to take in the last two years as the budget has gone down is to try to invest in those capabilities to give us the most general coverage. that's why i'm strong on sustaining our recognizance

capability because denied the area or not and similarly even when times were thin in theat l 90s, the human capabilities were extremely important. that is why i'm a huge proponent of what doc or fakers in general are doing with the clandestine service which isn't really an increase as much as it is a reshaping and recasting of organizations. i started when i was director of the cia better integration with the fbi and the cia, more clandestine case officer's who are worth their weight in gold and that is the capability of the intelligence department. as we have made these reductions we are going to have to focus much more on quality and the quality of our investments since we are not going to have safety in numbers.

>> i want general flynn to make a comment but one quick question. syria has come up a number of times. and there is clear evidence, public evidence that iranian involvement -- my presumption though is that there are are a regional forces who are operating inside syria who are supporting the efforts of the rebels posing -- >> yes. >> so this is not a situation where there is only one player, one external player in the field and this is actually a situation where there are capable people from other countries on the ground very.

>> yes that is true. it's a very complex situation there and one of the phenomenon that makes it even more difficult for us to assess good guys and bad guys is they will portray a different face depending on whether they're looking westward or some other way. one of the concerns we have is the magnet of syria. the europeans are very concerned about the 400 plus europeans that have gone to syria to fight the great fight. so it's a very complex situation. there are good guys and bad guys and shades of gray in between. >> i hope in the second round you can combat but i just want to say we are very proud of you

and -- nk you very much senator reid. senator ayotte. >> thank you mr. chair and i want to thank you for your service to our country. general flynn and your written your written statement you say iran is providing funding to the syrian regime, the assad regime and we know that iran also provides funds to hezbollah. can you let me know under director clapper were general flynn to support hezbollah is to run using lebanese sanctions or financial sector's? what access to the financial system do they have and contravention to our sanctions and international sanctions? >> you're speang specifically he iranianncia supp >> using the lebanese system. two things, hezbollah and the assad regime. >> it would probably be better

to take that -- off the top of my head i do not know specifics. >> i would appreciate that. thank you very much. i also wanted to ask both of you how has tehran characterized the united states withdraw from iraq without a follow on course? >> how would they characterize as? >> how is the previously characterized a? i understand it in your written testimony general flynn you set the supreme leader khamenei and senior military officials viewed the u.s. military withdrawal from iraq as a strategic defeat for the united states. is that true? >> i would say that is what we assesses their perception, yes. >> how might to run view a precipitous withdrawal from afghanistan? how do you think that would be viewed by our brand and b what

activities do believe that what precipitate in afghanistan by the iranians? >> well, the iranians have never cared for having us on either of their borders so just as they welcome our departure from iraq so will they are from afghanistan. and their interest of course is in sustaining their influence in both neighboring countries. in iraq they make that attempt and in afghanistan they don't think they will be as successful or influential in afghanistan as they might be in iraq. >> although i will say the general expressed concerns about that and the western part of afghanistan in our hearing the other day. what is iran doing now in iraq and how is iran using iraq including their airspace? >> well the main thing at least that i worry about is their

supplying of weaponry or explosives to the western part of iraq or iran -- afghanistan, excuse me. >> on your first issue i mean i think we have to understand how you are defining precipitous and also implications of the perception of the region and clearly iran. as we continue through our transition i think we all need to be paying attention to how we are doing that and we need to do it very smartly and i think the general pointed that out in his testimony. all the different players or something we pay very close attention to. nonspecifically on iranian influence i would add potential training to that as well of some of the kinds of capabilities and weapons systems that we have seen applied inside of

afghanistan particularly out in the west. >> when you say training what you mean by that general? >> training on small-arms and things like that that we have become aware of over the years. as we saw applied in iraq as well. >> director clapper, i wanted to ask you about the september 11 attack on her diplomatic ability in benghazi and i particularly wanted to ask you about the attacks on our consulate both on april 6 and june 6 that occurred before the september 11 attack. obviously where four brave americans were murdered and i wanted to ask you about the assessment of those attacks and whether you were briefed president lamar secretary clinton about the attacks in in

the security situation in benghazi prior to september 11? >> i did not personally briefed them but we certainly reported those in all of our intelligence vehicles. >> are your intelligence vehicles included the fire attacks on the consulate. >> yes. >> do you believe the intelligence community had a sufficient picture of the security situation in benghazi? >> i think we had a general idea of the situation in eastern libya. we probably didn't have fidelity on the exact situation in benghazi. but we certainly knew the lack of control that central government in tripoli had over the militias and in that part of the country. that is the historic tradition and that continued after the fall of gadhafi.

>> you said the intelligence briefings talked about the prior attacks i referenced in april and june prior to the september 11 attacks. but they have a previous estimate of the british closing their facility. >> yes. >> and are those the types of intelligence reported under the chain of command by not having a specific commerce patients say what the president and just be clear you didn't have any specific conversations with secretary clinton about this issue? >> well we had many conversations about it. i don't recall specifically a conversation with her prior to the attack on september 11. we could have. i just don't remember. >> i think both of you. i also wanted to ask general flynn about the chinese development of a fifth generation fighter and where

they are with that and also if you could comment on the russians development of the fiftgeration fighter.>> c of mol answers to that we would have to go to closed session but i would just offer that the capabilities that we are seeing being developed by china and russia are concerning. we played -- pay very close attention to these investments and capabilities and we work very closely with not only our commands in the various theaters, both you, and day combat are strong partners in the region to make sure we clearly understand hw good these capabilities are. >> thank you general. dr. clapper finally, given the assessment by the intelligence community regarding eastern libya what lessons do you te from t suaon that happened benghazi?

don't do a unclassified talking points with members of congress is one thing i learned from that experience. clearly we have gone to school on that situation to be subject of support to enhancing security and providing intelligence to more tactical level intelligence for these facilities. that said, we have plans here but obviously sequestration is going to have an impact on that. >> i know that my time is up. the lesson can be not to do talking points with members of congress, how about getting the talking points right? right. >> thank you senator ayotte.

>> thank you general, director, thank you. i apologize if some of these questions -- i had to step out for a few minutes. when you look at north korea and the decision-making chain there how is that working exactly right now? >> that's a great question. there isn't much of a change. it's probably the best it in the lede ki jong-un. there is an upward flow of information. they are all pretty much centered on one person. >> for lack of a better way to put it this decision is being made basically on a seat-of-the-pants -- >> that is kind of my impression. i think he is driven by the need

to prove his position and consolidated power and a lot of what he is doing and saying are driven by messages to domestic audiences and the international audience. >> the did the gen any rolee president to tell him what he wants to hear pretty much. that's our impression. >> the chinese, is there a point where they are no longer willing to continue this way? >> well, i don't know the chinese have reached that point but key indications that the chinese are certainly rethinking their relationship for the new administration of china. >> with north korea, what is the

extent and however much you can tell us the extent of north korea and iran's technology with nuclear-capable technology? >> not much. the iranians are a little wary of the north koreans. >> as the sanctions on both countries, are those sanctions working poor are you seeing them having an effect and are they affecting not only the lives of the people in the country but are they affecting decision-making at all? >> well, we discussed this a little bit before but yes the sanctions are having an impact in iran. there is no question it's had a huge impact on their economy. by any measure it's been effective but it hasn't changed the policy on their nuclear activity. no. in north korea pretty much isat ywaythe lone

benefactor for north korea is of course china, and china in my view if anyone has leverage over north korea, it's china. >> switching neighborhoods as we draw down in afghanistan does the amf's have the capability to conduct adequate intelligence and counterintelligence operations? see that as an enabler that any continued advice and assistance. there are our national organizations and the nds has had a long relationship with us but i think the military intelligence and counterintelligence probably needs moreork. ..

>> it adds to their ability to do intelligence and counterintelligence. >> the defense intel structure meeting with their counterparts on a daily basis and helping them develop that capability in teaching and training them and working with them and we will continue to do that as we transition. >> as you look at afghanistan in the border areas and across pakistan and especially in the frontier provinces those areas is there any, once the taliban

goes in there is there any pressure from the pakistan army or any efforts on the part of the government of pakistan to try to push back up their or is their greatest danger drones and other methods? >> we were talking about this earlier but the pakistan military has been engaged for the last decade conducting operations within their own territory to help not only themselves but some of these militia and terrorist organizations and insurgent organizations in their own country but also to help us out on the afghan side. there has been a lot of border cooperation between our units in regional capital east south southwest with some of their

er a lot harred the pakistani a lot of action has taken place. more needs to be done and we need to continue the dialogue open not only the international community and the region there are, afghanistan and pakistan particularly but also between the afghan military and the pakistani military. we have to help move the dialogue along but as director clapper said earlier, he mentioned that pakistan's number one issue is how they view india. that is really sort of the bigger and wider regional issue. >> and is the isi buying into this effort to try to work and clean up the frontier areas as well? i a talk to you about at in osed session.

john brennan the new director of the cia was just out there and had a pretty good meeting with the director of isi and i would be happy to fill you in on that in closed session. >> that's fair. thank you very much. >> thank you senator donnelly. senator cruz. >> thank you mr. chairman. gentlemen thank you both for your testimony today and thank you also for your service in a time of great risk throughout the world. i would like to ask questions on two regions of the world. first of all benghazi and secondly north korea. with respect to benghazi during the seven and a half hours of the attack on september 11 in benghazi, did either of you director clapper or general plan during those seven and half hours have any conversations with the president concerning what was happening there are?

>> did either of you during those seven and half hours have conversations with secretary clinton during that time? >> i did not. >> no, senator. >> thank you. previously this committee had a hearing within defense secretary leon panetta andgera dempsey which benghazi was discussed at considerable length and general dempsey at the time expressed his views and i am not paraphrasing but the nature of the attack and in particular the fact that multiple mortar shells were hit and rooftop demonstrated to him at the time that it was organized military attack and he had something -- something -- -- said something to the effect that it he thought it was obvious it was an organized military attack. i would interested in your

assessment of it was obvious at the time? >> no sir, it was not. the one thing they did, there were two or three faces of the attack. i would characterize the attack on the temporary admission facility is has much more of a vandalism and looting thing. the mortar attack which took place took 10 or 11 minutes and demonstrated some operational deficiency. i would commend to you and i don't know if you have seen this, a briefing that we put together visually re-creates as best we could with the actual events and i would be happy to have that are out to you so you could see our best replication of what occurred during the phases of the attack. >> i would be appreciative of that. thank you. general flynn do you have anything to add on that?

>> i would just sayhat personally my instincts were that what we were watching was particularly on the specific date was clearly something that was not what i would call normal activity. based on the strategic assessments that had already been made over the last number of months and i know that from our perspective, you know there was a sense that this was probably more organized and we of course judged that over the next few days. >> thank you. one additional question on benghazi. have we made any significant progress in identifying, apprehending the terroristterrorist sho carried out those attacks? >> the fbi is leading that investigation and has made some progress on identifying them.

i'm sure they would be happy to brief you on the state of it. >> at this point i would like to shift in north korea. you stated that north korea's missile programs pose a serious threat to the united states and i would like to invite you to elaborate on that threat. >> they have been at the nuclear business for 50 years. the technical infrastructure and technical expertise as we have seen and there are other facilities. they have pursued and developed welding missiles and conducted three on the ground tests. so they have what are the basic

ingredients for a nuclear equipped missile. at the same time there's a lot we don't know and that is what gives rise to the debate that is going on in the intelligence community with varying degrees of confidence levels that components in the intelligence have about the technical knowledge of whether they have actually built a weapon and it will work. so if they launch this moussa don missile that will be an interest to both them and us. they never launch one and the same is true with their long-range icbm. they displayed it in a parade but it's never been tested. >> director clapper on march 15 the vice chairman of the joint chiefs said publicly that he believes the north koreans quote probably north korea quote

publicly does have the range to reach the united states and in particular the k. in no way. do you agree with that se? >> this assessment. i can't argue with it. we have just never seen that tested or proven. >> general plan i would like to get your views on the same question. >> one of the things that i think is highlighted from the last couple of weeks of what we have been talking about with north korea and director clapper said earlier today, where we are today as a community is we ensure that all views are stated. all views are known. we do challenge each others' assumptions. those views are presented to every level to include the president all the way down to all of our combatant commanders. i think the assumptionat we make are the coonents of which

without going into any detail and of course we can get into much greater detail in another session but i think the assumption is where we really need to keep looking at, examining and challenging each other and ensure that those assumptions are presented. i know based on the way director clapper has encouraged all of us, we do that. >> general flan i guess in the past week the statement was made public from a report that it assesses with confidence that the north currently has nuclear weapons capable of delivering by ballistic missiles however the reliability would be low. what was the timeframe? what was the date of that assessment? >> first of all it was a seven page document. it was a classified document. the date of which was the march

timeframe. and to not beat a dead horse i guess, what we really have is as i was just saying, a difference in how we judge assumptions in this case. and there are are some other components that go into the methodology that we use and i would rather not discuss that here and more than welcome to get into excruciating detail in closed session. >> while i look forward to that and i guess one final question which is if i understood your testimony today, you currently have a higher level of confidence as to that assessment. am i understanding you correctly and if so could you provide some of the bases for that? >> there are differences in levels of assessment.

there is a difference. those differences are known and the reasons why and the factors that play into that are known. the answer to the latter part of your question is yes in closed session. >> i would just say serve t e for us centers around the fact that we know versus a what we -- to those facts and that is where i think healthy debate and healthy disagreement. analysts at the cia may have a different confidence level in that judgment with the rest of the communy d at's fine. a limiting those in coming up with the common denominator i'm not sure. >> thank you gentlemen. thank you mr. chairman. >> just to clarify, they have a higher level of confidence. is that fair to say? >> dia does, yes.

>> let's continue that line of questioning for just a moment. if nothing changes in north korea and they continue to be a military totalitariante where they spend most of their money on the military at the expense t own people and th continue to develop technology is just a matter of time before they have technology reach us. do you agree with that? >> probably so. i think if they keep working at it and clearly they have a single-minded focus on this. particularly the current leader perhaps more intensely than his father. i think he feels that is a threat that the nation faces. a more capable north korea with larger missiles and probably smaller bombs. do you think general flynn that is a reasonable threat be plaing to guard against? if nothing changes?

>> i do agree. that's reasonable. >> all right, syria. do they have enough chemical weapons to kill millions of people or thousands? potentially yes and of course that is dependent on lots of things, the number of casualties that could be incurred if they employ chemical weapons. >> but they have a lot of them that could kill lots of people? >> that is correct. >> so that's another threat that we face. >> yes. >> and the iranian nuke program, over the last six months have we been imposing sanctions and negotiating the p5+1 regime? do they have more or less enriched uranium for a nuclear bomb? >> sir, i will give you the exact numbers in closed meeting.

[inaudible] >> not highly-enriched but up to 20%. >> well they are marching in the wrong direction. let's put that in the bucket. china are they building up their military general flynn are they reducing their military? >> china is investing monin theirmilitary, absolutely. >> can you all give me a good explanation in light of all this why congress would seek sequestration. >> well senator i don't think we want to go there. we have spoken intensely about the impact of sequestration. >> let's just finish it out. general flan the sequestration was fully implemented, how would it affect your agency's ability to defend us against threats we face today and that could come

up tomorrow? .. >> monday and tuesday, we need to do a serious rethink on just what it is we expect of the u.s. intelligence enterprise, because it would be something much, much less than what we've had. >> okay. let's get back to to syria for -- are you familiar with the

opposition council? i think it's the syrian opposition council? >> well, yes. i know about it and what it is. >> have you met with those folks? >> no. >> okay. r wrote aletterlong with four memberof the senate who recently visited jordan, turkey and israel asking the syrian opposition council which is the political component of the opposition to allow the international community the day after assad falls to come in and secure the chemical weapons sites and tell the world that they would be okay with the chemical weapons being destroyed. and i'm waiting on a response. do you think that is a good thing for us to ask of the people who may take over syria? >> yes, sir, i do think it would be a good thing to ask. i think the issue is the extent to which any of these external uence inside the country.

th's been -- >> once assad falls, someone's going to take over. >> well, our assessment is that it will be fractionated. and, again, this is a projection. we don't know, but we believe the most likely option when assad falls -- and we think it is a question of time -- will be factions controlling various parts of the country. >> well, the syrian opposition council is a coalition of factions, and my hope is that they will be able to create some governing capacity. but since they're the organ that we're working with, the organization, i will continue to press them to renounce ownership syria, and i appreciate any help you could give us there. mye of the fearings i have after visit -- f have afr my visitis that radicalsve gotten more note theround in sy. i think that observation is

correct. >> it is. >> the big fear, the casualties of syria, the list of casualties could be the king of jordan. almost 500,000 refugees have spilled other into jordan. the king was incredibly concerned, and he said the longer this war goes, the worse it is for him. do you agree with that? >> i do. >> and if we'd looked back a year ago, the threats -- is syria getting better or worse over the last year? >> there is no, um, no good friend -- trend i can tell you about. >> so let's play it out a year from now. i mean, you could have millions of refugees in turkey and jordan if something doesn't happen, do you agree with that? >> i do. i think the infrastructure and the conditions in syria continue to deteriorate. there are going to be more and more people -- >> i just hope the international community's listening to you and we find a way to win this war. to me, winning now would be having the king survive, controlling the chemical weapons. and the second war between the

factions that's surely to come with the radicals would be small in scope and short in duration. i think that's the best we can hope for at point. general flynn, you said 352,000 afghan security forces under arms. do you recommend to this committee we continue that level of afghan security forces through 2018, the 352? >> that's thlya ssue. >> well -- >> i mean, from my standpoint, senator -- >> would that be wise on the ground? >> i think that the, i think that the afghan national security forces, especially the afghan national army, is a threat to a resurged, a resurgent taliban coming back -- >> general allen thought it was -- >> as well as -- >> would you agree with general allen when he said he thought it would be wise? >> sorry, sir? >> would you agree -- do you have any reason to disregard

what general allen said when he thought it would be wise to keep them at the 352? >> from an intelligence perspective, no. that's the guy that you should listen to. >> okay. one la qstion. and i think he's a good guy for us to listen to. drones. during the last five years potentially, would you agree with me that the drone program particularly in the tribal regions of pakistan and afghanistan and, quite frankly, throughout the world in ungoverned areas has paid dividends to this country in terms of our safety? >> absolutely. and if i can speak globally so that i can speak publicly, yes. >> wououike to continue that program to maintain our national security? >> oh, i think this is, it is a tremendous capability, and, yes. >> thank you both for your service. >> thank you. we're going to have a three-minute second round. because i think two votes are

director, you have said that the sanctns against iran are having huge effect on their economy. they've not yet induced a change in their policy. just very quickly, do you believe that the combination of keeping the, those options in place and strengthening them if possible plus keeping military options on the table, continuing our efforts in multilateral diplomacy gives us a reasonable chance of convincing iran they should not build nuclear weapons? >> well, that is also a policy question -- >> what's your assessment? >> i'll speak personally that, and my answer would be, yes. >> okay. now, the issue of benghazi has come up, and i want to just understand exactly what your role was in terms of hose points -- of those points, the point favors. did you approve, director, the talking points? >> i did not, i did not.

people below me did, but i did not see them until after the fact. >> you indicated here in your quick back and forth with senator ayotte that you thought that those talking points were right. >> they were the best we could do at the time and, also, in light of our concerns from both an intelligence and investigatory standpoint is that is as much as we should say at time. that is illustrative of the dilemma of speaking in public about intelligence things, which is somewhat -- can often be an oxymoron. >> did you believe that they were accurate at the time? >> it was our, it was -- well, it wasn't completely accurate because there were some things particularly from a source and methods and because of investigatory concerns that the fbi had, no, it wasn't completely accurate. it's the best we could do at the time and still protect those

equities. .. and when she was highly criticized for following them, what was your feeling inside? you're own personal belief -- >> i thought it was unfair because the hits she took i

didn't think that was appropriate and she was going on what we had given her. that was our collective best judgment which it had been said. >> have talked to them in my office before coming and referring to the amex that is the second wave of the attacks he had repeated it here. he used that word. you disagree with that? >> no, i don't. that is the one thing that happened that had an earmark of some organizations proficiency was an 11 minute attack on the mx facility. >> i appreciate th.

but, it sounded like -- i will go back and read the transcript and answer that. last, this is the last thing i have come and that is as the withdrawal takes place in afghanistan would that necessarily withdraw a likely percentage of our capability. >> we obviously the key devotees in afghanistan we will be drawing down as well. that is a function of te footprint, whatever residual footprint remains for the dod river department they have and the exact profile that we will have has not been determined yet

and of course our main concern is detecting a potential threat to the homeland. by virtue of the fact. for the intelligence purposes that is certainly going to change the landscape to the estimate the second part of the question is should it and that is a hard question to answer because as we talked before about the needs that were there the west african and other places. i keep hearing on a percentage basis the withdrawal of that is going to impair the medeg your tlincti and resources. >> that's probably a fair statement, but is that proper? >> as i say, senator, to sustain

sufficient presence to monitor the situation not to the fidelity and the degree that we have today with a lot of force print. >> thank you, senator came king. the sequesters cannot allow today going on about flexibility and giving you the flexibility to have the cuts around. is flexibility enough to solve the problem or is the sequester still a problem in the absolute dollars no matter how much flexibility you have? >> that is a great question, sir. i don't know of any professional intelligence officer when asked to use more resources wouldn't

say absolutely. and so, the normal financial cuts that we are observing this year will have impact. we have the capabilities we can't get back. we discussed that at a hearing ontsay. my great concern is sustaining this, and particularly the impact that it's going to have on the most resources. >> we need to be able to do our mission but it's also all of our customers, not just customer number one at the white house the combatant commanders, joint task force commanders, the leaders conducting operations around the world the challenges we described today is where the demand signals come from.

>> on the issue of your people, federal employees haven't had a raise in three or four years. there's a threat of furlough days the vindicate you've been aba id. but are you seeing an impact in terms of retenon and recruitment one of the great mistakes of the 90's is falling out of the human capacity. is that a threat in this situation? >> it will be. and i had to say that whether or not we are going to have furloughs has not been completely resolved yet particularly until the components in the department of defense. our attrition rate has run the last three or four years around 2.4, across the entire rac which is pretty low. we have a nuer ofeople who

will be eligible o are now 10% of the entire can now and in the next five years another 15%. i think if we go to drastically reduce these, the intelligence community to include its people, we would need to, if i may -- i'm talking out of school here because i haven't gotten the permission of the allin de -- but we basically have the same incentives or the inducement for people to retire as we did in the 90's. thus the amount of money and all that sort of thing which isn't really that much of an incentive these days. so if we have to do a dramatic reshaping of the work force, again, having a latitude to 's very impotant.t,ave, to end it's crucial. something we didn't do very well in the late nineties that we continue to bring on new people

and new energy to the intelligence community rather than letting the work force age out. >> if i could add just specifically in the last ten years we have gone from roughly 25% of the work force of employees in their 20s and 30s to 50% in the last ten years. what i'm afraid of is those young people have become many of which from our organization have deployed from places like iraq and afghanistan over the last decade will feel as though this life that they have decided to dedicate themselves to in defense of our country they will walk away from this and i am concerned about that and i think that there is an awful lot of uncertainty, especially as i talk to these young people in our organization and i think it is unfair. >> thank you come gentlemen, for your service and testimony

today. >> i'm going to call on senator blumenthal in a moment, but the vote has begun. i am open to leave in a few minutes. if you would, senator blumenthal, when you are done with your questions the committee would appreciate it. >> thank you mr. chairman and i will be brief because of the vote we have going on right now. but wted to ask generally in terms of our collaboration with the intelligence community are you satisfied that there is a complete and cooperative rolph information? >> absolutely, sir. and i've been associated with intelligence in one capacity or another for 30, 35 years. it's never been closer or more pervasive. >> without asking you the specific assessment with respect to the iranian diplomat and a clear capability what it you say

the assessment on your part is the same? >> generally speaking, yes. this is a commentary on the intimacy of the relationship. we have the same dialogue and debate and argument analytically that generally speaking we are on the same page. the same page based on more or less the same effect as them the same kind of availability of information. we have unique sources but generally, yes. do you share the information coming from the separate uniques sources? >> pretty much. >> let me turn now to the pakistani situation. are you satisfied that the pakistani military and its government are taking fficient

steps to safeguard its nuclear arms. maybe without asking for information the would feel uncomfortable disclosing, and i certainly don't want to press you on that score can you tell us whether you believe there is more that can and should be done? more can and should be done by the pakistani military. >> i prefer to discuss that in closed sessions. >> let me turn to venezuela could you give us some idea of what the current fraudr irregularities that are ongoing in their electoral process?

>> that is unclear. the issue is whether there would be a sufficient magnitude under their system that would merit a free count and this juncture it doesn't appear to me to be the case. >> in your view there would be no requirement for the recount? >> as far as i know now, no. >> finally, you spoke a few minutes ago about the challenges of recruiting and keeping the minds in america which all of us want to be available to the american intelligence community. is their anything that we can do to encourage or support that effort. >> they get a pay raise occasionally into would be nice not to be threatened with loss. >> i took that to heart and to mind. with that, let me say thank you

to both of you for your service to the nation which has been distinguished. i adjourn this hearing. thank you very much. >> one of the suspects in the boston marathon bombings dzhokhar tsarnaev is from a region in russia near chechnya. his older brother was shot and killed by police. the search for dzhokhar is ongoing throughout watertown about 8 miles west of boston. the area is on lockdown and people are asking to stay in their homes and streets.

amtrak services have been suspended in the boston area at the request of local authorities. trains along the northeast corridor or terminating at new york's penn station to the secretary of state john kerry held a joint press conference with mexican foreign secretary jose antonio and during the press conference, secretary former senator from maacseou the boston marathon bombing. >> before we begin i just want to say that has a father and as a grandfather, my thoughts are in my home town right now, boston where eve ensler still unfolding and the entire city is on lockdown. we are continuing to learn every moment of the terror attack on monday in the pursuit of justice that is following it. i think it is fair to say that this entire week we have been in a pretty direct confrontation with evil. and i want to congratulate and

find all of law enforcement authorities for the extraordinary job that they have been doing on behalf of our citizens. in the past few days we have seen the best and the worst of human behavior and it's the best that all of us really want to focus on. like everyone, we are going to keep watching and we will await word from law enforcement officers for commenting further you can watch the joint press conference with secure carey and the mexican foreign secretary in its entirety at eight eastern.

i strongly urge you to come up with a number that tells this committee and the american people we have a responsibility as well. for you to say we are just going to see how things turn out well determine the size of the post 2014 force that i believe is a tragic and terrible mistake we made a a heavy price. >> we are today advising and assisting at the battalion level. we will lift off this fall. the number is inextricably linked to the level that we belie to provide close to 2014. >> you have to wait until 2014 to determine that?

>> what i suggested is this is the afghans first summer. i believe this will be the bellwether for the afghan performance in 2014 and beyond.

>> defense secretary chuck hagel and the joint chiefs of staff general martin dempsey testified on the hill on wednesday about the 2014 budget request during a three in the half hour comttee they faced a number of questions abthe impac implementation of the $52 billion in additional defense cuts that were mandated as a part of the sequestration. threats from north korea and iran were also major topics during the hearing. >> good morning everybody. today the committee gives a welcome to secretary defense chuck hagel congenital martin dempsey the chairman of the joint chiefs of staff accompanied by the departments controller undersecretary bald hail for a hearing on the department of defense fiscal

year 2014 budget request in the posture of the u.s. armed forces. we welcome the secretary on his first appearance as secretary defense before this committee. we thank them for the service to the nation and the soldiers, sailors, airmen and marines at home and at harm's way. we can never say that enough. your testimony today is a component of the committee's review of the 2014 budget request for the department of defense. this year's request includes $526.6 billion for the base budget, and 85, excuse me, $88.5 billion for overseas contingency operations or oco. although as your testimony notes the oco is simply a place holder

figure on the force level and de disions. the future of the defense budget is in flux due to thefailure to enact legislation reducing $2.2 trillion required by the budget control act. is a result of that the dod funding for fy 2013 was reduced by sequestration in the amount of $41 billion unless congress acts, the 2014 dod budget would be paid by an additional $52 billion which is in the president's budget in the senate and house of representatives the congress can fix the budget pr bacting legislation that reduces the deic by $1.2 trillion over ten years that would take a grand bargain including both spending cuts and an additional revenues that

would turn off the automatic spending cuts of sequestration for those ten years to buy remain hopeful we can develop such a bipartisan plan perhaps in a so-called grand bargain we could devise a balance deficit reduction package for one year that avoids sequestration in fy 2014. we simply cannot continue to ignore the effect of sequestration. sequestration will have a major impact on military personnel. though the pay of military personnel has been exempted, the sequester would reduce military readiness in the services for the troops including schools for military children, family support programs and transition assistance programs and mental health and other counseling programs. the president's budget request continues a major drawdown of active duty and reserve strength. we have in recent years given the department numinous force

shaping authorities to allow it to reduce its strength in a responsible way ensuring that the services maintain the proper force mix and avoiding grade and occupational disparities, all of which have long term affect. if sequestration continues, the result would be ore pripitous foe structe that is ou of t the requirements of our defense strategy. sequestration has already affected military readiness. we have heard testimony that is a result of cuts of flying hours and other training activities and testimony that the readiness will fall below acceptable levels for all three military services by the end of this summer. the army for an example has informed us that by the end of september, only one-third of its active duty units will have acceptable readiness ratings far below the two-thirds level with

the army needs to achieve to meet national security requirements. these cuts are having an operational impact as well. for example, th fighter sqdrons in europe have been grounded and the developmeutnt excuse me, the deployment of the truman carrier group to the persian gulf has been postponed indefinitely. it will cost billions of dollars and months of effort to make up for the shortfalls and the training and maintenance and will be impossible to do so if we have a second round of sequestration in the fiscal year 2014. our men and women in the military and their families should not have to face both the pressure of military service and the uncertainty about future financial support from their government. the department faces these budget shortfalls at the time when 68,000 u.s. troops remain in harm's way in afghanistan.

we must above all ensure that our troops in afghanistan have with the need to carry out their mission. w ack to reach a majoristan is milestone later this spring when the lead for security throughout afghanistan will transition to afghan security forces. as our commander in afghanistan told us yesterday, there are clear signs that the afghan security forces are capable of taking the fight to the taliban and are doing so effectively. operations by afghan security forces are increasingly conducted by afghan units on their own. fewer casualties and a four week stretch earlier this year with no u.s. or coalition fat. the department's budget

challenges which are the subject of today's hearing are occurring in a world full of threats to the u.s. security including north korea's reckless rhetoric and provocative behavior and perhaps the greatest world threat, you're on's nuclear program and its support for international terrorism. in the interest of time going to submit the remainder of my statement relative to those in other matters for the record. we will have as notified a separate hearing on the growing blood shed in syria after the conclusion of this morning's session. we will take a half-hour break and then we will return to hear from our witnesses about the situation in syria. secretary congenital dempsey, we look forward to your testimony and i now call on senator inhofe >> welcome our guests, and especially my friend, former

senator we have worked together a long period of time and we have always remained good friends. the request comes at a time when our military is facing unprecedented challenges categorized by the threats abroad and the growing budget crisis here at home. unfortunately the budget before us today is symbolic for its lack of presidential leadership necessary to overcome the challenges facing our military and most troubling, the budget doesn't even acknowledge the mandatory tests associated with sequestration in fiscal year 14 much less propose a plan to replace the cuts that can actually pass congress. this isn't a new phenomena. the defense to budget cuts have become a hallmark of this administration. if you want to get into a lot more detail and have a piece in this morning's hill that gets into a lot more detail. the office over four years ago the president has already cut

over $600 billion from the military at a time bomb security related domestic spending has increased buy nearly 30%. the chairman of the joint chiefs of staff testified that after the absorbing over $400 billion of cuts cannot afford to give another dolar ith are to tain cnt capabilities. our militaryadersarearning that we are onhnkof creating a hollow force and prepared to respond to contingencies around the world yet according to fy 14 budget requests the white house now feels that we can have another $120 billion out. we are at the point in the nation's history where our national military strategy is no longer guided by the threats we face or an honest assessment of the resources needed to protect our critical interest centered on how deeply we can cut the

defense. our forces are now being asked to do more with less training and equipment and capabilities and increased risk of our servicemen womeng t makin ultimate sacrifice and this is not acceptable and the fiscal year there's little to reverse this. they are defining the steaming hours. the most complex damaging thoughts to the national security in recent history we are posed by over a trillion dollars in net period of time. we have made this mistake before in the military drawdown in the 1970's and 1990's left this country with the military too small to meet the instability and the rising threat of the

changing world. it's what iriving o country's unsustainable debt. more important it's just wrong to bid the spending accounts for 18% of the federalist spending annually while the non-security mandatory spending accounts for 60%. we are on a path of insatiable appetite to protect domestic spending and mandatory programs of consuming our defense budget it would soon result in a hollow military restoring to the budgeting process to ensure that our military leaders have appropriate resources to develop and execute plans and manage the department sufficiently. i have repeatedly repeated the warnings of the admiral many

times over t last three months and this is an accurate quote that is re. we've come potentially down this far in the defense budget there could be the instances we may be asked to respond to the crisis and we will have to say we cannot do it. we have to correct this, mr. chairman. >> thank you very much. senator inhofe. welcome. >> mr. chairman, thank you. to the ranking member inhofe and members of the committee, thank you for the opportunity to appear before you this morning. i'm going to interrupt you before we get started because we have a quorum and that means that we can now consider a list of pending military nominations and i know you would want us to do that. so, i will now asked our committee to consider the 549

pending military nominations including in this list is the nomination of the general to the commander european command in supreme allied commander of your up. of these nominations, 311 are one day short of the committee's requirement for seven days before we report that out. no objection has been raised to these nominations and i recommended that we waive the 70 rules to permit the confirmation of the nominations of these 311 officers as well as the others. is there a motion to report? all in favor, ayes. thank you very much. secretary. >> is the hearing over? >> it is. [laughter] at least 549 nominees it's over.

>> i know the general and all of us are pleased with that action as well be the other members of our team, so we appreciate your deliberation and action. i had a longer version that was distributed to the committee and committee members on the 2014 budget. let me say on behalf of the men and women both in uniform and civilians that are prayers and hearts go out to the people in boston, the families who lost loved ones, those who were injured, wounded by this despicable act of how our leaders and those responsible

for assisting and dealing with the tragedy in boston how they have responded and proud of the national guard. i would like to put that on the record, mr. chairman come and make that a considerable note. >> thank you for that. our sympathies were respected yesterday at a hearing that we have here. we join you in your sentiments. thank you. >> allow me first to express my appreciation and that of the department of defense to this committee in each of its members for its continued support of our men and women in uniform and civilian work force. they are doing tremendous work, mr. chairman, and senator inhofe, as you have both noted they are making great sacrifice along with the families as they

have for more than 11 years of the nation at war. the dedication and professionalism of the military strength we diussembs and budgets and strategic riori this morning we will lose sight of those men and women serving across the globe. as you know the well-being depends on the decisions we make here in washington. the budgeting at a time of considerable uncertainty both in terms of the security challenges we face are around the globe and the levels of defense funding we can expect here at home. even as h and recovers more than a decade of sustained conflict in iraq and afghanistan it conference and an array of complex threats to include the persistence of violent extremism throughout the

week states and on governed spaces in the middle east and north africa the dangerous weapons and materials. it could draw in the united states faceless, nameless, silent and destructive cyberattack. the debilitating human despair and poverty as well as implications of environmental degradation. the advance of the three technology to the state and not state actors. this is a strategic environment facing the department of defense as it enters a third year of the declining budgets putative the onset of theesaintreadleto significant an ongoing belt-tightening in the military modernization force structure

personnel costs and overhead expenditures. you have noted some of those, mr. chairman. it's also given us an opportunity come an opportunity to reshape the military and reform the defense institutions to better reflect 21st century realities, flexibility, agility, the process began under the leadership of secretary gates who cancelled or curtailed more than 30 modernization programs and trimmed overhead costs in the military services and across the enterprise. the realignment continued under secretary leon panetta who worked closely with the president and the joint chiefs of staff for guidance in the fys top line by $487 billion over the course of a decade. the request of $526.6 billion with the dickerman of defense base budget for fy 2014 continues to implement the

guidance and enhances the department's efforts of institutional reform it sustains the quality of the volunteer force and the care that we provide our service members and their families which underpins everything we do as an organization. allow me to address the problems facing the department of 2013 and beyond as a rest to they have responsibility to find answers to these problems together because we have a shared responsibility. to ptect national security.lty the dod is going to need the help of this committee. we are going to need the help of congress to manage through this uncertainty. the dod appropriations bill enacted by congress tossed month

funding more closely in line with the president's budget request giving the department authority to start new programs and allowing us to proceed with important military construction projects. nonetheless, the bill still left in place the deep and abrupt cuts associate withequester, as much as $41 billion in spending reductions ov the next six months. military pay and benefits are exempt from sequester and we made a decision to shift the impact of the sequestered from those serving in harm's way. furthermore, the experience and a higher operating tempo and higher transportation costs than expected when the budget request was formulated more than a year ago. as a result of all these factors the department is now facing a shortfall in our operation and maintenance accounts.

it's the future travel on the maintenance imposed hiring freezes and many other importan but lower priority activities. however, we will have to do more. we will have to do much more. we will send the congress a reprogramming request designed to offset some of our shortfalls we ask for the speedy review and approval. the ceilings on transfer authority can only solve some of our problems. we will have to continue to consider furloughing in the months ahead. there will also be significant cuts in maintenance and training which further erode the readiness of the force and will be cost will to regain in the future. as the chiefs have said, we are consuming our readiness. meanwhile investment accounts and the industrial base are nots

in the budget to be we will continue to need a strong partnership of this committee to help us address these shortfalls if the related provisions of the budget control act of 2011 are not changed come fy 2014 funding for the national defense programs will be subject to a steeply reduced cap which would further cut the funding buy roughly $52 billion. if there is no action by the congress and the president, roughly $500 billion in reductions to the defense spending. as an alternative the president's budget proposes 150 billion in the defense savings over the next decade. thesare the balanced pacofge de. unlike the sequester these cuts ack loaded, occurring mainly in the area beyond fy 2018.

that gives the department time to implement these reductions widely, carefully, responsibly, anchored by the president's defense strategic guidance. let me turn to the details of the president's budget request for fy 2013. the 526.6 billion fy 2014 budget request continues to balance the demand of supporting our troops still at war in afghanistan, protecting readiness, modernizing the military is aging weapons inventory and keeping with the president's strategic guidance and sustaining the quality of the all volunteer force. today's budget request also contains a place holder request which you have noted, mr. chairman, for overseas contingency operations at the fy 2013 level $88.5 billion. the submission does not include a former request because the afghanistan for sluve ball and

deployment were delayed in order to provide commanders and of time to fully assess responsibility. the base budget today continues the department's approach of the last seral years, the first target gwing cos a of support and acquisition and pay and benefits before cutting the military capabilities and force structure. the budget identifies the savings of about 34 billion in an fy 2014 including 5.5 billion in fy 2014 from these areas. in order to maintain balance and readiness, the department of defense must be able to eliminate excess infrastructure as it reduces the force structure. dod has been shedding infrastructure in europe, shedding infrastructure in europe for several years and

consolidating the infrastructure and undertaking the review of the european footprint this year. we also need to look at our domesc footprint. the 2014 ruest authorization one round of base realignment and closure back in 2015. it's a comprehensive and fair tool that allows communities to have a role for the property and provide development assistance. brac as we all know is in perfect and there are up front costs. the future year of theefense program adds 2.4 billion to pay for those costs. but in the long term, there are significant things. the previous five rounds are saving $12 billion annually, and the savings will continue. the department continues to streamline its acquisition programs and process these and

over the past four year we have realized significant cviots as e reforms implemented by the weapon system acquisition reform act of 2009 sponsored by the chairman and senator mccain. in this budget the department has achieved 8.2 billion in savings from weapons program terminations and restructuring. for example by revising the acquisition strategy for the ground combat vehicle, the department will save over 2 billion in development costs. in other cases, the department used evolutionary approach is to develop new capabilities instead of relying on the head gains and technologies. the cost of military pay and benefits are another significant driver of spending that must be addressed in the current environment. in this budget, the department is substituting a new package of military compnsation prosals and take io nseration ssnal concerns

associated with those in fy 2013. these changes save about 1.4 billion fy 2014 and a total of 12.8 billion in fy 2014 through 2018. this includes a modest slowing of the growth of military pay by implementing a 1% pay raise for service members in 2014. the department is seeking additional changing to the tricare program in the 2014 budget to bring the beneficiaries costs closer to the levels and vision when the program was implemented. particularly for the working age retirees. survivors and military members that died on active duty or were medically retired members would be excluded from all of the tricare increases. even after the changes in the es', tricare will still remain a very substantial benefit pity these adjustments to pay for the most carefully considered

difficult choices in the budget. they were made with strong support of the joint chiefs of staff and the senior enlisted the leadership in recognition that in order to sustain these benefits without dramatically the size and force, these rising costs need to be brought under control. spending reductions in the draw down cannot be implemented to improving efficiency and overhead alone. the cuts and changes in the capabilities, force structure, modernization program will all be required. the strategic guidance issued in january of 2012 set the priorities and the parameters and informed the choices in the 2014 budget submission further implement and deepens the program alignment to the strategic guidance. the new strategy calls for smaller, more flexible force. last year we proposed reductions

of about 100,000 in military and strength between 2012 and 2017. most of the reductions occur on the ground forces and are consistent with the decision not to size u.s. ground forces but to prolong stability operations while maintaining adequate capability should such activities again be required. by the end of 2014 we will have completed almost two-thirds of drthe awdown of the ground forces, and the draw them should becomplete by fy 20 increased emphasis on the asia pacific in the middle east represents another tentative and new defense strategic guidance. the budget continues to put a premium on the rapidly deployable self sustaining forces such as submarines, long-range barriers and strike groups pitted the can project the force of a great distance and carry out a variety of complicated missions. this new strategy leverages new concept of operations enabled by

advances in space, cyberspace come special operations, global mobility rescissions strike missile defense and other capabilities. by making difficult trade-offs in lower priority areas, the fy bud2014t protect or irses the key ivestments in these other of focus and the request is sustaining the readiness and quality of the all volunteer force. the high quality of the all volunteer force continues to be the foundation of our military strength and the fy 2014 budget request includes 147.1 billion for military personnel as well as .4 for the mitar me care. this makes up one-third of the base budget. this budget seeks to ensure the troops received the training and equipment they need for military readiness and the world class support programs they and their families have earned and

deserved. the public continues to support the provisions and programs and supports thevibersnd their families spending 8.5 bill iniatives that include transition assistance and federal unemployment insurance, sexual assault prevention and response. the 2014 budget is a reflection of the dod best efforts to match in eskimo ways and means during the period of intense fiscal uncertainty. it is obvious that significant changes to the top line spending would require changes to this budget plan. the department must plan for any additional reductions to the defense budget that might result from congress and the administration agreed on the deficit reduction plan. it must be prepared in the east end of the sequester will cut persist for another ear over the long trm. consequently i direct the strategic choices and management review to assess the potential

impact of further reductions of to the level of the full sequester. the purpose of the review is to reassess the basic assumptions that drive the departments investment and force structure decisions. the review will identify strategic choices and further institutional reforms that may be required including those reforms which should be pursued regardless of the fiscal pressures. it's designed to help understand the challenges and articulate the risk and look for opportunities for the reform and efficiencies presented by resource constraints. everything will be on the table during this. the rules and mention, planning business practices, force structure, personnel, compensation, acquisition and modernie, how we measure and maintain readiness. this is conducted by the peace secretary carter. the service chiefs office of the

secretary defense principles and combatant commanders will serve as a central participant. our aim is to include this review which is now under way by may 31st. the results will inform our fy 2015 budget request and will be the foundation of the quadrennial defense review due in congress in february of last year. it's already clear to me mr. chairman that achieving significant budget savings without unacceptable risk and the national security will require not just chipping away at existing structures and practices, but if necessary fashioning new ones that better reflect the 21st century realities. and that will require the part congress the modest reforms to the personnel and benefits along with efforts and restructure acquisition

programs and were not implemented. we are now in a completely different environment dealing with new realities that will force us to more fully confront these tough and painful choices and to make the reforms we need to put this department on the path to mintain our military strength time and some budget certainty. we also need to fund the military capabilities necessary for the complex security threats of the 21st century to but i believe the president's budget does that. the have other ways to operate more affordable, efficiently and effectively. multiple reviews show the major cuts especially those on the scale and the time lines of the sequestration. mr. chairman, that completes my

formal remarks. as i said i have a more detailed report that i have submitted for the record, and i appreciate the time of the committee and i look forward to our questions and now i know you would like to hear from general dempsey. >> secretary, your full statement will of course be made a part of the record. general dempsey. >> thank you ranking member. i would like to add my thoughts and prayers as the secretary mentioned to those affected by the attack in boston and also tell you how proud we are of our guardsmen who were among the first responders and of course we will stand ready to provide whatever support as this issue evolves to be a welcome this opportunity to update you on the united states armed forces in 2014. this hearing comes at a time of extraordinary uncertainty as the risk to our national security

are rising. it's in this context i offer my perspective on how we can work together to sustain a balanced joint force. one thing you should be certain of and that is our men and women are steadfast in their courage and in their devotion to duty. i saw it recently in their eyes as i have the honor of reenlisting some of them at the bottom airfield. in afghanistan our forces are simultaneously fighting come transitioning and redeploying. the afghan military as the secretary said will soon take operational need for security across the country as they gain confidence to the afghan people. the collision will remain in suppas ta4 and at every point along the way, we must make sure that our force levels match the mission that we ask of our men and women in uniform. our joint force has been vigilant elsewhere as well and we are deterring aggression and

ensuring our allies in the states of provocation by north korea and iran we are working with our inner agency partners to defend against cyberattack acting directly and partners to defeat al qaeda gentry balancing to the asia-pacific region and adapting to a new normal of compostable violence in north africa and the middle east and as we will discuss to keep the complex confliro destabilizing the rein we are prepared with options as they call for and if it can be used effectively to secure without making the situation worse. we must be ready for options with an uncertain and dangerous future and this budget was purpose built to keep our nation immune. it aims to restore versatility to be more affordable joint force in support of our defense strategy. but let me also be clear about what this budget does not do.

this budget doesn't reflect the full sequestration amount. it does impose less reduction and give more time. however, uncertainty does persist about the top line will be for this or any other budget. nor does this include funds to restore. we don't yet know the full impact of the cost to recover froeitfas we are experiencing this year. as expected we have already curtailed the training for many units across all forces, those not preparing to deploy. and we all know it is more expensive to get ready than it is to stay ready. costs will compete with the cost of just building the joint force towards 2020. this budget does however invest in our priorities. it keeps the force in balance the it supports a fully deployed operation. the nuclear to devotees prove themselves so essential to the

defense. it also lowers manpower cost to the excess infrastructure to make it more sustainable. most importantly come and protect our investment in our wr people and it treats th best trained a b qote military as the non-negotiable and imperative never was the nation's a stand such a link the war solely through the service of an all volunteer force. many veterans return home as a front line in the struggle with the wounds seemed in the world class treatment for mental health issues, traumatic brain injury and combat stress. to address the urgent issue of suicide with the same version we have shown to protecting the lives of those in combat. the risks inherent in the military service which must never include the risk of sexual assault, sexual assault betrays

the trust on which our profession is founded. we will pursue every option to drive this crime from the ranks. the will to win is on daunting but the means to prepare to win are becoming an uncertain. with this and any future budget to restore confidence we have it to stay strong as a global leader and a reliable partner. the joint force is looking to us to read through this correction, but we can't do it alone and as i've said before we need budget certainty, we need time and flexibility and that means the predictable funding strength and it means the time to deliberately evaluate the trade offs and force structure modernization compensation and readiness and it means the full flexibility to keep the force in balance. thank you for doing all you can.

they are responsible investments in the nation's defense and i look forward to your questions. >> general, thank you so much. secretary, you have a comment. we are going to have a seven men at first round it may be likely to be the only round given a large number of senators that are here today. let me start first with you congenital dempsey. do you personally support the request for the department of defense budget for fy 14? >> i do. do you know whether they share your view? >> they do. we heard yesterday general, that quite an optimistic assessment in the security situation in afghanistan more optimistic than in previous years we heard that from our commander and i'm wondering whether you shared the generally op domestic assessment

that we heard. >> lives with the general and his commanders about two weeks ago. i will say that my impression after visiting some of the operational coordination centers the afghan government is applying some of their instruments and some governments and economic factors does leave me to be more optimistic than i have been in the past where i felt like we hbeendo good job but not necessarily that they've been shouldering as much of the burden as i think the need to shoulder. >> have you reached a conclusion as to the troop level that you are going toeommend to the president for the post 2014 period? >> no, we have not, senator. as you know, i said in a previous hearing in a target that nato has established during the range let's call that.

>> is that a target for u.s. forces? >> that would be isaf and that part of the mission to the existing. >> the president hasn't made a decision on that either, is that correct? >> that's cr. >> in terms of the reduction between 2014 the president announced plans to draw down 44,000 of the 66,000 troops in afghanistan by february 2014. is it true the pace of that drawdown will affect the funds that are needed and when they are needed? >> i'm sure it will and that is the reason that i think he would agree that a budget hasn't been submitted yet.

we are trying to find out. to plan the reduction was important to allow him to plan the case and manage the equilibrium between fighting, transitioning and redeploying people and that i think that is why the budget is delayed to be a disconnect of the commander has the flexibility we presumably of them from the commander how to exercise the flexibility that we are going to determine the oco. >> that would be my understanding of the sequence. it's bad for the record, not now because my time limit. would you tell us how the pace as it is determined by the commander of the commander has the flexibility will affect the needs for the record.

>> in this budget secretary, we have certain amounts that are going to be utilized for our missile defense. the interceptors and alaska have made a decision relative to the phase at active approach which as been adopted i'm wondering what me ask you, general, do you personally support th defense approach that's been decided upon by the administration. >> in particular from north korea. >> that includes both parts of missil defense approach

that i just identified one as the amount and the phased adaptive approach and alaska both pieces do you approve both parts? >> i do. >> on the brac issue, as i understanding your testimony and your budget, mr. secretary, there is a short-term cost that there was an additional brac improvements, but that cost is not in the 2014 budget request. you put it in the 2015 budge